UK must raise interest rates, warns OECD

[CHIMO]

The west's leading economic thinktank today warned the Bank of England that interest rates need to rise over the coming months to suppress growing inflationary pressures in Britain.

In its half-yearly health check on the global economy, the Organisation for Economic Cooperation and Development (OECD) said Threadneedle Street should start lifting the interest rate from its emergency level of 0.5% in the second half of the year.

However, a positive update from the Paris-based body on the outlook for economic growth helped global markets rebound from losses earlier in the week. The FTSE 100 ended nearly 2% higher at 5038.08, recovering the bulk of Tuesday's 2.5% drop, while Wall Street was about 50 points higher in early trading. France's CAC 40 added more than 2% and Germany's DAX rose 1.5%.

The OECD also said the Bank should simultaneously start to withdraw the £200bn of quantitative easing – the electronic money pumped into the economy in a bid to lift it out of its worst postwar recession.

http://www.guardian.co.uk/business/2010/may/26/oecd-backs-coalition-spending-cuts