THE OECD cut its economic growth forecast for the UK yesterday and said higher oil prices argued for lower British interest rates as long as inflation remained controlled.
Jean-Philippe Cotis, the chief economist for the Organisation for Economic Co-operation and Development, trimmed Britain's outlook to 1.9% from 2.4%.
He also cut Germany's growth rate to 1% from 1.2% but kept his forecast for the US economy at 3.6%.
Cotis advised the Federal Reserve to ease the pace at which it raises the cost of borrowing because of the threat to growth from high oil prices, which hit a peak above dollars-70 a barrel last week and up more than 50% since the start of the year.
He said the Bank of England could probably cut rates but all 47 analysts polled by Reuters last week predicted no change when the Bank's monetary policy announces its decision on rates tomorrow.
After that, 17 pundits said a slowing economy would prompt another easing later this year.
Another 17 said the Bankwould wait until 2006 before cutting rates any further.
And eight said the next move in interest rates would be up.
Before last month's cut - the first in two years - most economists believed the central bankwas about to embark on a series of rate reductions to boost flagging consumer spending and business investment.
However, news that four out of the nine MPC members, including governor Mervyn King, had opposed the July cut because they were worried that inflation could still be a problem has greatly clouded the outlook for the months ahead.
"Economic news has been mixed and the wafer-thin 5 to 4 majority to ease last month means that there is currently little momentum for further cuts, " said Philip Shaw, chief economist at Investec.
Meanwhile, the hard-pressed UK manufacturing sector showed more signs of life in July as output rose for the fourth month running, the Office for National Statistics said.
The ONS said manufacturing production rose by 0.1% in July, lifting the annual rate to a gain of 0.2%.
City economists had predicted output would be unchanged on the month. It marks the longest stretch of increases in nearly five years and follows a manufacturing recession in the first half of the year.
Geoffrey Dicks, an economist at Royal Bank of Scotland, said it has been a long, slow grind for manufacturers to pull clear of recession, but the ONS figures suggested that "at least the worst is behind us for UK industry".
The ONS said July's monthly manufacturing rise was driven by a pick-up in transport equipment output, particularly motor vehicle and engine production, which had been hit hard in earlier months by the collapse of carmaker MG Rover.
NO GREAT EXPECTATIONS
New Prev
UK1.9% 2.4%
Germany 1% 1.2%
US3.6% 3.6%
Eurozone 1.3% 1.2%
France 1.6% 1.4%
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