OECD Cuts U.S. Growth Forecast On Belief Trump Stimulus Coming Too Slowly; Bumps Up Europe

By Rachel Koning Beals Markets MarketWatch Pulse

The Organization for Economic Cooperation and Development has cut its economic growth forecasts for the U.S. this year and next, saying stimulative measures it had expected from the Trump administration would now likely be implemented later than the Paris-based research group had previously anticipated. The OECD expects U.S. growth this year of 2.1%, down from the 2.4% forecast it gave in March. It also lowered its projection for 2018 to 2.4% from 2.8%. The OECD raised its forecasts for the eurozone for both this year and next, and nudged up forecasts for Japan and China. The OECD predicts global economic growth for 2017 at 3.5%, a slight increase from the 3.3% it predicted in March. There are risks to its view, it concedes. Namely, the OECD believes financial markets are anticipating even better economic growth outcomes than are likely, which heightens the risk of a "snap back" in asset prices. The group also sees a potential red flag in housing markets because prices in some countries have risen to levels that have in the past preceded busts. As for the European Central Bank, the OECD recommends it wind down bond purchases in 2018 and raise its key interest rate by the end of that year. That view is based on predictions for core inflation to slowly approach the target by the end of 2018. The ECB next meets on Thursday and while no policy change is anticipated, financial markets expect at least a slightly rosier outlook from ECB head Mario Draghi.

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