The call adds to growing pressure on the euro zone, and the European
Central Bank in particular, to boost growth ahead of a meeting of
finance ministers and central bankers from the Group of 20 economic
powers later this week in Australia.
Updating its growth forecasts for major developed economies, the
Organisation for Economic Cooperation and Development projected
growth in the euro zone at only 0.8 percent this year and rising
only slightly next year to 1.1 percent.
That marked a sizeable downgrade from its May Economic Outlook for
the euro zone, when the Paris-based organization forecast growth of
1.2 percent in 2014 and 1.7 percent in 2015.
In comparison, the OECD saw the United States' economy growing 2.1
percent this year before accelerating to 3.1 percent in 2015. In May
the OECD forecast U.S. growth of 2.6 percent this year and 3.5
percent next year.
The United States is set to push European countries at the G20
meeting to step up measures to boost demand and economic growth in
the face of the risk of deflation, according to a senior official at
the U.S. Treasury on Friday.
OECD acting chief economist Rintaro Tamaki said financial markets
had largely ignored mounting geopolitical risks to the global
economy and the euro zone's worsening outlook.
"This highlights the possibility that risk is being mispriced again
and the attendant danger of sudden corrections in the financial
markets," Tamaki told journalists.
The OECD said that though euro zone inflation, at a five-year low in
August of 0.4 percent, should strengthen as demand recovers, low
levels close to zero raised the risk of deflation.
Citing the example of Japan in the 1990s, Tamaki warned that
financial market inflation expectations, closely watched by the ECB,
were a poor judge of future inflation trends when it sets monetary
"Recent ECB action is welcome but further measures, including QE
(quantitative easing), are warranted," Tamaki said. "The perception
that policy action is always too little too late needs to be
The ECB recently cut the cost of borrowing to near zero and pledged
to buy repackaged debt in an effort to encourage lending to
However, so far it has shied away from the kind of quantitative
easing carried out by counterparts in the United States and Japan,
consisting of a huge campaign of buying government and other bonds
to lower the cost of borrowing.
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Separately, credit ratings agency Standard & Poor's said in a report
on Monday it expected the ECB to launch a fully-fledged quantitative
easing program targeting private-sector bonds.
"In our view, the vulnerability of the recovery in the eurozone, the
elevated risks of a triple dip, and the threat of negative inflation
would justify the recourse to additional non-conventional measures,"
Outside of the euro zone, the OECD saw the strongest growth among
major developed countries coming from Britain, forecasting 3.1
percent for this year and 2.8 percent for next year. In May it had
forecast growth of 3.2 percent in 2014 and 2.7 percent for 2015.
Asked about the prospect of Scotland opting in a referendum to leave
the United Kingdom, OECD secretary general Angel Gurria said: "We
would like to see the United Kingdom remaining together. We think
that it would be best for all its component parts."
Turning to Japan, the OECD forecast growth of 0.9 percent this year
and 1.1 percent next year as the economy recovers after a sales tax
hike in April muted consumer demand in the first half. The OECD
trimmed its estimates from May for growth this year of 1.2 percent
and 1.3 percent in 2015.
Outside of the OECD member countries, the group saw growth roughly
stable in China at 7.4 percent this year and 7.3 percent in 2015,
both unchanged from its estimates in May.
(Editing by Ingrid Melander)
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