OECD says ECB rates still below neutral level

Market expectations for a further ECB tightening move in the next three months are realistic, it said.

'The level of interest rates remains below most estimates of the neutral rate, so monetary policy is still supporting activity,' the OECD said in a report on the euro zone economy.

'Financial markets are pricing in at least another 25 basis point increase in rates over the next three months. This is realistic, as the ECB has made clear that monetary stimulus will continue to be removed so long as the recovery broadens and no major negative shocks push output or inflation off course,' it said.

'The real effective exchange rate is close to its average through the 1990s and should not be a major concern for the economy yet. However, a substantial further appreciation would put the export sector under pressure,' it said.