Halting easy money could derail recovery: OECD
The global economic recovery is at risk of being derailed if the "unconventional" monetary policies which have injected cheap loans into the financial system are not maintained, the Organisation for Economic Co-operation and Development (OECD) has warned.
While advanced economies like the U.S. and the U.K. have begun to recover from their economic difficulties,slowing growth in several key emerging markets has helped keep global growth "sluggish", according to the OECD.
"It is necessary to continue to support demand, including through unconventional monetary policies, in order to minimize the risk of the recovery being derailed," the group warned.
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It also called for action to tackle structural problems in the economy as well as support demand.
"Weak employment, sluggish global growth and lingering global imbalances underline the need for structural policies - in addition to those to support demand – to create jobs, raise growth, ease fiscal pressures and permanently reduce external imbalances," the OECD said.
The U.S. Federal Reserve's plans to reduce the rate of bond purchases, currently running at $85 billion a month, met with approval from the OECD. It warned that Japan's policy of monetary easing should continue "until the new 2 percent inflation target has been sustainably achieved."
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Euro zone policymakers should consider prodding banks to pass on more of the cheap loans into the "real economy" - small businesses and borrowers – the OECD said. It also urged the European Central Bank to maintain current "supportive monetary conditions."
The OECD is not the only authoritative voice to add caution to optimism about the global economic recovery.
Morgan Stanley cut its global growth forecast to 2.9 percent in 2013 and 3.5 percent in 2014 on Tuesday, down from 3.1 percent and 3.9 percent respectively, citing weakness in the emerging markets.
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