OECD's Gurria lauds Fed move

By Mike Dolan

DAVOS, Switzerland (Reuters) - The U.S. Federal Reserve's biggest interest rate cut in more than 20 years this week showed great leadership and other central banks may have to re-examine their view of the economic risks, OECD chief Angel Gurria said on Wednesday.

Gurria, who is Secretary General of the Organisation for Economic Cooperation and Development, told Reuters that Tuesday's Fed rate cut was "a question of confidence and a question of leadership".

"This gives credibility to the fiscal package (of tax cuts) in the United States and covers the short term while households wait for their cheques," Gurria said in an interview on the sidelines of the World Economic Forum in Davos. "The whole package amounts to something real and credible from the world's biggest economy."

Gurria would not be drawn on whether the OECD expects a recession in the United States this year but he said U.S. growth was probably very low or flat now. "The reaction of the Fed itself suggests they saw something in their most recent information and that points to a fairly serious threat," he added.

The Fed cut its key interest rate by three quarters of a percentage point on Tuesday following steep losses on global equity markets over the previous week.

Gurria said the situation for other central banks such as the European Central Bank and the Bank of England was less acute than in the United States and their mandates were different.

"In Europe, it's less obvious, less acute and you have a more complex burden on the shoulders of policymakers," said Gurria. But there was a "shift in the criteria" being looked at by European authorities, less focused solely on inflation than on the risks to growth, he said.

"Europe is less vulnerable than the United States to the subprime housing problem, but it is just as vulnerable to a systemic drop in confidence," said Gurria, adding that aggravating inflation worries from oil and food prices were likely to ebb.