The OECD has cut its forecasts for US economic growth and warned that the Federal Reserve should stand ready to cut interest rates again if the economic recovery falters in the near term. The organisation lowered its forecast for 2003 growth to 2.7pc from 3.5pc previously, and lowered its forecast for 2002 growth to 2.4pc from 2.5. The previous forecasts date back to the OECD's semiannual economic outlook in April.
Although activity picked up quickly after last year's terrorist attacks, the recovery "is still fragile, given the substantial role played by inventories, the weak labour market and the further decline in the stock market," the OECD said in a report on the US economy. Continued productivity gains augur well for a renewed period of economic expansion, but the timing of a recovery in business investment, which contracted rapidly during last year's recession, is uncertain, it added.
The OECD cited a number of downside risks to the economic recovery. Profit concerns may make managers tentative about capital spending and employment, and confidence could be adversely affected by continued equity market turbulence and slow improvement in the labour market. //www.fxcentre.com