Paris, May 23 (Reuters): The Organisation for Economic Co-operation and Development (OECD) called on Tuesday for the Federal Reserve to tighten interest rates a bit more as it projected US economic expansion was set to stay solid this year before easing slightly in 2007.

“A light ‘tap on the brakes’ seems necessary to keep the economy in balance,” the Paris-based OECD said in its half-yearly Economic Outlook report.

It raised its projection for US GDP growth to 3.6 per cent in 2006 from 3.5 per cent it had forecast in November. Core inflation was seen at 3.0 per cent for the year. Although the Fed has raised rates 16 times in a row to 5.0 per cent, the OECD said a slight tightening remained necessary.

It said rates were currently around neutral ? meaning neither accommodative nor restrictive ? but that another move was needed as labour markets were becoming tight and oil prices were adding to inflationary pressures.

But next year, it said, falling core inflation and rising unemployment would permit “a slight relaxation of monetary policy.”

The group saw both growth and inflation easing in 2007. Real GDP growth should be 3.1 per cent next year while inflation would come down to 2.3 per cent, it said.

“The economy continues to perform impressively. Output has grown strongly, the unemployment rate has fallen and core inflation has been relatively stable,” the OECD said.

“Solid economic growth seems set to continue, albeit at a slightly slower pace.”

It said a lagged response to higher oil prices, higher interest rates and a cooling of the US housing market lay behind its expectations for growth to moderate. It said higher oil prices had likely added half a percentage point indirectly to core US inflation but that this had largely been offset by other factors.