The Federal Reserve should continue to raise U.S. interest rates but the European Central Bank should ease euro zone monetary policy, the OECD says in its semi-annual Economic Outlook out today. Euro zone growth forecasts of 1.2 % for 2005 and 2.0% for 2006 are based on the assumption that the ECB, which has maintained its core refinancing rate at 2.0% since June 2003, will cut rates by half a percentage point in mid-2005.
?With domestic demand sluggish, resilience feeble and possible upward pressures on the euro looming ahead, the balance of risks on growth and inflation is clearly tilted to the downside, calling for an early easing of monetary policy?.