OECD Calls Out Abnormally Low Inflation and Interest Rates as Risks

Abnormally low inflation and interest rates are building up new risks for the global economy, a leading thinktank warned on Wednesday, as it called on governments to play a greater role in shoring up the recovery.

The Organisation for Economic Cooperation and Development says in its latest economic health check that low oil prices and loose monetary policy are boosting growth in the world’s big economies, but that the near-term pace of expansion remains modest.

The Paris-based organisation reiterated a forecast made last month that the UK economy will grow 2.6% this year, matching last year’s pace but slower than the 2.7% it had been forecasting at its November outlook. The 2016 forecast is for 2.5% GDP growth.

That puts the UK ahead of eurozone neighbours France and Germany, but behind the US, which the OECD sees growing 3.1% this year.

In its latest interim economic assessment the thinktank warns that against a backdrop of better growth prospects for big economies, including in the eurozone, there is a growing risk of financial instability.

Its prime concern is that low borrowing costs and inflation mean activity is driven by easy money rather than fundamentals. The OECD highlights an over-reliance on central bank policy and warns that more needs to be done by governments in terms of tax and spending policy as well as structural changes.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza