Global economic group cuts US growth forecast

DUBLIN -- The Organization for Economic Cooperation and Development cut its forecast for US economic growth and expects the Federal Reserve to lower interest rates next year, according to a draft of its latest estimates.

The Paris-based group, in its semi annual economic outlook, by contrast is urging the European Central Bank to keep raising rates as Europe's expansion continues and cautioning the Bank of Japan against lifting borrowing costs before deflation is beaten.

The group reduced its forecast for US growth to 2.4 percent next year from the 3.1 percent prediction in May, accounting for a bigger downturn in US housing markets than anticipated. Home building will continue to decline for "several more quarters," the group said in the draft.

The group said that "mildly restrictive" interest rates will cool inflation and drive up unemployment, which last month reached 4.4 percent, a five-year low. The jobless rate may reach 5 percent next year, it said.

The forecasts for US growth and inflation are in line with private estimates. The economy will probably expand 2.6 percent in 2007 and consumer prices will climb 2.4 percent, according to the median estimate of economists surveyed by Bloomberg News from Oct. 30 to Nov. 9.