OECD urges Fed, ECB, BoJ Against Raising Interest Rates

PARIS ~ The OECD urged the US, Japanese and European central banks this week to avoid raising interest rates further, saying current inflation conditions did not justify monetary tightening.

In separate comments directed at each of them, OECD chief economist Jean-Philippe Cotis acknowledged that inflation was “still a bit too high for comfort” for the Federal Reserve in the United States.

But he added: “With growth set to remain subdued in the near term, there is no compelling case for the time being to resume tightening” interest rates.

Cotis also suggested the European Central Bank had no basis for further rate increases.

“With inflation having recently surprised on the downside, the outlook for price stability looks fairly benign,” he said.

In Japan, “deflation is lingering on and the policy rate should not be raised before inflation is firmly positive.”

There has been wide differences between the action of the US, eurozone and Japanese central banks over the past 12 months.

The Federal Reserve finished its long cycle of tightening interest rates in August last year, leaving its key rate at 5.25 percent after a string of 17 quarter-point increases.

The ECB completed its seventh quarter-point rise in eurozone interest rates in 15 months last week, taking its key rate to 3.75 percent.

In Japan, the Bank of Japan raised interest rates last month for only the second time in over six years to 0.5 percent.

The OECD, or the Organisation for Economic Cooperation and Development, is an international economics institution that counts 30 of the most industrialized countries in the world as members.

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