hr: Money

Photo Credit: mrmatt
While it is true that global inflation has accelerated at record high, this isn’t the time for central banks to cutting interest rates, warned the Organization for Economic Cooperation and Development.

The bleak forecast by the OECD is reflected by the economic expansion in its 30 members which is forecasted to decline 1.8 percent in 2008 and 1.7 percent in 2009. These forecast underscores the slowest growth from 2002, reversing the December prediction that there will be a global economic rebound by 2.4 percent during the following year from 2.3 percent.

What is needed now to stir the economy back on the right course are policies that are well judged and careful execution of these policies as these things take time to rebuild.

The rising food prices and the ever escalation oil prices have greatly hampered the efforts of the Federal Reserve as well as its other global counterparts in fighting inflation and helping the economy grow. In this light as the world faces one of the severest global inflation ever, the OECE urges major central banks to leave interest rates unchanged at least for the remainder of the year 2008.

The Federal Reserve should keep key rates at 2 percent until such time that the economy starts to recover, say in mid 2009. At this time the central banks can begin increasing key rates by 4 percent, according to the OECD.