The combination of a sharp contraction in China and a shock in the financial markets has the potential to derail the global recovery, the Organisation for Economic Co-operation and Development has cautioned, as it trimmed its forecast for global growth.

It also warned that the euro zone is failing to reap the full benefits from the steep fall in commodity prices and the depreciation of the euro, cutting its medium-term forecasts in spite of a small improvement this year.

The OECD warning follows a summer of turmoil on global markets, which have swung wildly on the back of worries over the Chinese economy.

The US Federal Reserve is set to decide today whether to increase interest rates for the first time in nearly a decade, a momentous choice which is adding to the overall climate of uncertainty.

In its Interim Economic Outlook, the OECD only marginally lowered its projections for global growth from three months ago, cutting its 2015 forecast from 3.1 to 3 per cent and its 2016 prediction from 3.8 per cent to 3.6 per cent.

– (Copyright The Financial Times Limited 2015)