Brussels, 13/03/2007 (Agence Europe) - World growth was likely to re-balance in 2007, said Jean-Philippe Cotis, Chief Economist with the Organisation for Economic Cooperation and Development (OECD). He also warned American, European and Japanese central banks of hasty interest rates rises.
The downturn in the United States was likely to continue through the first quarter of 2007, with the OECD predicting growth of 0.5%, compared with 1.4% for the same period last year. This fall was largely the result of a slowing of the housing sector, said Mr Cotis, presenting the OECD's economic perspectives to the press on Tuesday. With moderate short-term growth, it did not seem useful “to start raising levels for the moment”.
In the eurozone, the advice was implicit. The solid growth was being maintained, although it was “likely to slow a little in the first quarter” (to 0.6%) having achieved annual growth of 2.8% over last year. Business sentiment continued to be upbeat overall, and faster job creation should support household incomes and consumption, said Mr Cotis. He felt that: “With inflation having recently surprised on the downside, the outlook for price stability looks fairly benign”. In the euro area, “accommodation” had been largely “withdrawn” over the past few months, consistent with higher-than-expected growth, Mr Cotis said. Following the meeting of the BCE Governing Council last week, JeanClaude Trichet felt that the policy was still accommodating (see EUROPE 9382).
For Japan, the OECD revised its 2006 forecast downwards, from 2.8% previously to 2.2%, and now expects 0.5% in the first and second quarters of 2007. “The only thing for Japan to do is to keep rates as low as possible to come out of deflation, even though this may create problems for the financial markets”, said Mr Cotis. Europeans, worried at the level of the euro against the yen, will appreciate this, without waiting for a further monetary tightening by the Bank of Japan. The situation on the stock markets having stabilised a little after the recent turmoil, the attractiveness of the yen for “carry trade” transactions could also be maintained, despite calls for caution from the G7 and the IMF, say observers. (ab)
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