From Reuters, as published in the Financial Times:
The Federal Reserve will continue to raise U.S. interest rates but the European Central Bank should ease euro zone monetary policy, the OECD said on Tuesday.
In its semi-annual Economic Outlook, the Paris-based think tank also said Japan should stick to ultra-easy monetary policy and that any move to change this policy would be premature given persistent mild deflation pressures...
Its U.S. growth forecasts, of 3.6 percent for 2005 and 3.3 percent for 2006, are based on the assumption that the Federal Funds target rate will continue to increase “incrementally” to reach 4.75 percent around mid-2006 from its current 3.0 percent.
Euro zone growth forecasts of 1.2 percent for 2005 and 2.0 percent in 2006 are underpinned by the assumption that the ECB, which has kept its main refinancing rate at 2.0 percent since June 2003, will cut rates by half a percentage point in mid-2005...
In Japan, rates are assumed to remain at zero through the end of 2006.
British interest rates, which have already been raised by 1.25 percentage points from their July 2003 low, are expected to stay unchanged at 4.75 percent, a level the OECD said was close to, if not already around, neutral.
The outlook, of course, depends importantly on the course of energy prices.
While increases in oil prices led to a slowdown in growth in 2004, the OECD said it was assuming the price of a barrel of Brent crude oil would fall from $51 in the second quarter of 2005 to $48 at the end of 2006.
“This is broadly in line with the assumption underpinning the OECD’s medium-run baseline scenario that the price of oil will gradually revert towards its long-term equilibrium level, as risk premia and other temporary factors abate,” it said.
“Commodity price inflation is assumed to begin easing in the course of the projection period,” it added...
“Inflation pressure from rising oil prices is contained,” Cotis said, adding real wages were not spiralling upwards in response as they had done in past decades.
For more information on the report, the OECD link is here. For more on the latest economic outlook here and there, check out the Skeptical Speculator.
UPDATE: Today also brings news on manufactured-goods spending by French households in April (looking good) and first quarter GDP growth in Germany (not looking good). (Hat tip, A Fistful of Euros.)
UPDATE JR.: The Prudent Investor provides yet more details.
UPDATE THE THIRD: General Glut summarizes the OECD's advice for the Fed, the Bank of Japan, the ECB, the Bank of England, and Bank of Korea. Very nice.