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OECD Says Oil Prices and Inflation Not Hurting Industrial Economies - 2004-09-21

A leading economic think-tank sees a strong recovery in the second half of the year for major industrial economies, in spite of high oil prices, and says inflation is not yet a concern.

The Organization for Economic Cooperation and Development, in an interim report, says oil prices have so far had only a limited impact on core inflation and wages in the world's major economies.

Oil has recently traded around $46 a barrel - much higher than normal. However, Jean-Philipe Cotis, the chief economist for the OECD, told VOA that the impact of an oil price hike is a lot smaller today than it was 30 years ago during the first oil shock.

"Industrial economies are well equipped to deal with this uncertainty," he said. "Although we would do a lot better without this uncertainty, they should be able to withstand this sort of perturbation in the future."

Mr. Cotis also says inflation is not yet a concern and governments will be able to allow interest rates to remain low.

"Inflation expectations have not moved a lot despite the small oil price shock we had," he said. "It means that price stability is well anchored in our economy and monetary policy will not have to tighten prematurely."

The OECD has slightly lowered its 2004 forecast for economic growth in the United States to 4.3 percent, from 4.7. However, in the 12-nation euro-zone the growth forecast has increased to two percent, and for Japan it has increased to 4.4 percent.

Mr. Cotis told VOA that all evidence indicates there will be a strong recovery in the second half of the year in the industrialized countries, to be followed by what he expects to be a robust expansion.