The US Federal Reserve may need to ease monetary policy in the near term to support a fragile recovery in the world's biggest economy, the OECD said today.
In a report, entitled an Economic Survey of the United States, the Organisation for Economic Cooperation and Development forecast the US economy would grow by nearly 2.5 per cent this year and 2.75 per cent in 2003.
"However, downside risks remain," the OECD said in the report. "The recovery that began early this year is still fragile".
The organisation's forecast for growth next year only slightly above this year's rate of increase represents a marked downward revision from its last prediction in its April Economic Outlook, in which it saw 2003 growth at 3.5 per cent.
Weak stock markets, the risk of further oil price rises and a slow improvement in the labour market were the main threats to the recovery, the OECD said.
"Given the marked deceleration in inflation and the tepid recent pace of final demand growth, the authorities [the Federal Reserve] would seem to have room to wait until the recovery is more clearly established before shifting to a more neutral stance," the OECD said.
The report comes a day after US Treasury Secretary Mr Paul O'Neill said the US economy was progressing well but that it was uneven across sectors. Evidence pointed to a "bumpy-road recovery", he said.