OECD calls on ECB to cut rates

The Organization for Economic Co-operation and Development on Tuesday called for an 0.5 percent reduction in interest rates in the eurozone.

The OECD came to the conclusion that outside influences, such as the Iraq war and high oil prices, were not enough to explain the lack of recovery in eurozone economies and that what is needed is sustained momentum in the eurozone.

The European Central Bank, however, has maintained that a drop in interest rates would be harmful action not supported by “sensible” economists, and in fact some officials at the ECB have advocated that interest rates should go up.

The OECD determination, however, has support from Germany’s economics and labour minister as well as from Italian ministers, which may make it difficult for the ECB to maintain its stance.

The OECD, in its twice-a-year report on the outlook of the global economy, also cut its growth forecasts for all leading economies, blaming this on growing imbalances. It also predicted that the current account deficit in the United States would hit $900 billion (€715 billion) in 2006.

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