US to lead OECD growth, rapid credit growth in China raises concerns, Brazil raises interest rate

The OECD released its latest economic outlook on Wednesday. It sees world real GDP increasing by 3.1 percent this year and 4 percent in 2014. Across OECD countries, GDP is projected to increase by 1.2 percent this year and 2.3 percent in 2014.

The US economy is expected to lead growth among the major OECD economies, growing by 1.9 percent this year and 2.8 percent in 2014. The euro area economy is expected to contract by 0.6 percent this year and then rebound by 1.1 percent in 2014. Japan's economy is expected to grow by 1.6 percent in 2013 and 1.4 percent in 2014.

Meanwhile, China is expected by the International Monetary Fund to grow by 7¾ percent this year, with the pace of growth picking up moderately in the second half of the year.

However, the IMF also noted “important challenges” for China. It warned in particular that “the rapid growth in total social financing—a broad measure of credit—raises concerns about the quality of investment and its impact on repayment capacity”, and that “growth has become too dependent on the continued expansion of investment”.

Indeed, Bloomberg reports that the “economy is proving less responsive to credit”. Credit rose 58 percent to a record 6.16 trillion yuan in January-to-March but each $1 in credit firepower added the equivalent of just 17 cents in GDP, down from 29 cents last year and 83 cents in 2007.

It was another BRIC country, however, that tightened monetary policy on Wednesday. Brazil's central bank raised the benchmark Selic rate by 50 basis points to 8.00 percent.

Brazilian inflation had accelerated for nine straight months through March to 6.59 percent, above the top of the central bank’s target range of 2.5 percent to 6.5 percent, before slowing to 6.49 percent in April.

In contrast, the European Central Bank is more likely to ease than tighten, especially with the eurozone's largest economy, Germany, reporting an increase in unemployment in May amid moderate inflation on Wednesday. The number of people out of work rose 21,000 this month while inflation accelerated slightly to 1.5 percent.