The Organization for Economic Cooperation and Development predicts that the United States will endure a flat economic landscape in 2010 and may even face deflation, according to Reuters. The OECD says that the Federal Reserve may have to resort to purchasing even more debt from the private sector in order to prevent prices a spiraling of prices.
In its report, released two days before the Group of 20 Summit in London, the OECD says that U.S. real gross domestic product will fall 4 percent in 2009 and then level to zero in 2010. “A gradual recovery may take hold next year as financial conditions improve and macroeconomic policies exert a growing positive impulse,” said the report.
The OECD advised that the Federal Reserve maintain its near-zero interest rates through 2010.
The report emphasized that the U.S. must be vigilant in patrolling the state of the market, and must be prepared to buy up even more bad assets in an effort to stabilize the financial sector, advising that financial regulators should “make it clear that [they] will not hesitate to restructure systematically important but fragile financial institutions, even if that entails taking control of them.”
The OECD report also addressed Canada, predicting a 2009 real GDP drop of 3 percent, with an increase of 0.3 percent next year. Economic activity in all of the OECD countries will average a drop of 4.3 percent, with Japan projected to lose 6.6 percent of its real GDP.