PARIS (AP) — The Organisation for Economic Cooperation and Development yesterday lowered its forecast for economic growth in the major European economies and Japan and raised its expectations for the United States, which it predicted will grow at the fastest pace of all G7 economies.

The Paris-based international agency said tax cuts in the US, combined with strong exports, caused it to revise its expectation for economic growth to 1.8 percent this year, faster than the 1.2 percent forecast in June.

Japan will grow by just 1.2 percent, down from June's 1.7 percent forecast, the OECD said, predicting the country will avoid recession with a partial bounceback in the second half.

The 15-nation euro zone is set to grow at a 1.3-percent clip, compared with 1.7 percent forecast in June. Major economies Germany, France and Italy, which like Japan all shrank in the second quarter, should also avoid recession defined as two consecutive quarters of negative growth, according to the centerpoint of the projections.

However the OECD's chief economist Jorgen Elmeskov said the "relatively wide" range of the forecasts indicates a risk that all four economies could shrink again in the current quarter. The British economy, which is expected to chart 1.2-percent growth this year, could be entering a recession with growth expected to shrink in the third and fourth quarters, the OECD's central projections show.

"The picture for the major economies is for a pretty weak second half," Elmeskov told reporters at a Paris news conference.

He gave a nod to the interest rate policy of the world's leading central banks, saying the US Federal Reserve, the European Central Bank and the Bank of Japan should leave borrowing costs unchanged as they try to balance inflationary pressures with sluggish growth.

The Fed's two-percent rate is justified so long as economic slack contains inflation, he said. Meanwhile, the ECB should keep its benchmark rate at 4.25 percent to counter price pressures, and the Bank of Japan is advised to buffer against the risk of deflation, keeping its key rate at 0.5 percent.

Elmeskov said the financial crisis caused by the fallout from the US sub-prime mortgage market has passed to a second phase as banks "appear to have recognised most of the losses and write-downs related to sub-prime-based securities."

Continued turmoil reflects signs of weakness in the global economy, and the eventual depth and extent of financial disruption is still uncertain, the OECD said.