Europe’s economy is slowing to a greater extent than had been predicted according to the latest OECD forecasts.
The Organisation for Economic Co-operation and Development’s chief economist Jorgen Elmeskov said the UK is basically stagnating, mainland Europe is doing only marginally better and the United States continues to look sickly.
The OECD has raised its annual forecast for US growth to 1.8% from the 1.2% it had forecast in June, while cutting its prediction for the euro zone to 1.3% and for Britain and Japan to 1.2%.
The European Central Bank gets a thumbs up from the OECD for its monetary policies, which are judged to be appropriate in the current circumstances.
Chief economist Jorgen Elmeskov defended the ECB’s decision to increase the cost of borrowing to try to tame inflation.
He said “The ECB has been faced with a continuous tendency for updrift in inflation, not just something that’s arisen over the past five or six months as the oil price spiked.”
He also said it is not clear at this stage how much a drop in oil prices and therefore inflation would boost household morale and spending.