The time has come for the Fed to raise interest rates. This is the opinion of the OECD, which takes into account the improved forecasts for economic growth in the United States in the coming months. In its mid-year estimates, the organization says the country will grow by 2,6% in 2011, up 0,4% from last November's analysis.
Positive numbers, but lower than the expectations of the American Central Bank, which last April had forecast an annual growth of between 3,1 and 3,3%. The main brakes on the expansion at the moment are the high prices of energy and raw materials. Despite everything, the OECD recommends that the Fed start withdrawing some of the extraordinary aid to the economy during the course of the year. "A modest reduction in monetary stimulus would be needed in the second half of 2011," reads the organization's report.
According to Alan Detmeister, head of the American economic department at the OECD, the US central bank should raise the refinancing rate to at least 1% in the coming months. The high level of unemployment (currently at 9%) is not considered a sufficient reason to keep rates at the minimum level. This policy risks causing inflation to travel excessively and inflating new speculative bubbles.
Even if the Fed's policies appear to be oriented differently, the Parisian institution believes that monetary tightening must come as soon as possible. According to Detmeister, a "neutral" rate, which would neither slow down nor greatly boost growth, would be around 4,5%. Starting now to tighten the purse strings could therefore avoid the need for "much more violent and potentially destructive maneuvers" to arise in the future.
