OECD backs pressure on Draghi

Mario Draghi was crystal clear when last April he expressed his desire of not being given any recommendation before ECB’s meetings. He alluded to the International Monetary Fund’s advice to urgently approach the euro zone “low-flation” by some easing policy. Mr Draghi sarcastically responded the IMF’ head has been “extremely generous”  with her suggestions, but advised the institution to share that generosity “with other monetary policy jurisdictions, like for example issuing statements just the day before a Fed’s meeting.”

However, this words did not seem to impress the OECD, which on Tuesday was very harsh in their warning the central bank to take action against the deflation menace.

According to the Paris-based international organisation, the ECB should reduce interest rates from current 0.25% to 0%, and cut the deposit rate to a “slightly negative” level.  Furthermore, regarding the ECB’s forward guidance, the point should be to hold rates at least until year 2015. The OECD’s chief economist Rintaro Tamaki also suggested that the European central bank ought to be ready to use unconventional measures, namely corporate as well as sovereign bond purchases and a new round of long-term refinancing operations (LTROs, in its English acronym).

As for the eurozone’s  growth, the OECD increased their expectations by 0.2% to an 1.2% in 2014 (the same that the European Comission published on Monday). They did not agree, however, with the EC’s forecasts on inflation. Their revising downwards was even more severe than those and the ECB’s to 0.7% in 2014 and 1.1% in 2015.