OECD scales back growth forecasts and tells ECB to start QE

The international think-tank said continued weakness in the euro area and uncertainty caused by conflicts in Ukraine and the Middle East meant it was now more cautious about prospects for advanced economies this year.

It reduced its May projection for the UK by 0.1 per cent to 3.1 per cent, but this was the smallest revision among the major world economies after the United States was cut by 0.5 per cent to 2.1 per cent and the euro area slashed by 0.4 per cent to 0.8 per cent.

The OECD is slightly more optimistic about the UK next year - raising its forecast by 0.1 per cent to 2.8 per cent when many other nations are being downgraded.

It said the global economy was growing at a moderate and uneven pace, with a growing degree of divergence between the major nations.

The OECD called on the European Central Bank to take a “more vigorous” approach to monetary stimulus by introducing quantitative easing.

The ECB cut interest rates earlier this month.

Geopolitical risks have grown in recent months and the OECD said this was at odds with the recent bullishness of financial markets after record highs on Wall Street and a 14-year high for London’s FTSE 100 Index.