PARIS (Reuters) - The OECD advised the central banks of the United States, Japan and the euro zone to leave interest rates on hold for more than a year in a report on Thursday which said more rate cuts by the U.S. Federal Reserve were not needed.

The Organisation for Economic Co-operation and Development forecast slower economic growth in the industrialized world and a sharp slowdown rather than recession in the United States in the short term due to a worsening housing slump.

In a twice-yearly report, it said its new economic forecasts were based on assumptions that U.S. interest rates stay on hold at 4.5 percent until recovery kicks in in 2009, when the Federal Reserve could raise its key rate by 25 basis points in the third quarter.

It assumed the European Central Bank, which was meeting on Thursday, would keep official rates on hold at 4.0 percent in the 13-country euro currency zone "over the next couple of years" as a strong euro and fading oil and commodity prices contained inflation.

The Bank of Japan should not raise rates from the current 0.5 percent until a return of inflation was confirmed, said the OECD, which assumed in its forecasts no rate moves in 2008 and then two increases of 25 basis points each in the second and fourth quarters of 2009.

The Bank of England had room to cut rates from the current 5.75 percent without hurting price stability, the OECD said, while further cuts by the U.S. Federal Reserve would only be warranted if recession risks intensified.

On British policy, OECD acting chief economist Jorgen Elmeskov told Reuters in an interview the OECD was recommending a BoE rate cut of 25 basis points this year, and others thereafter.

"We recommend that in the current quarter they have a cut of a quarter of a percentage point and then we would expect some further cuts in the first half of 2008," he said.

The Bank of England is due to announce its last rate decision for this year at 1200 GMT (0700 EST) on Thursday.

The report included macroeconomic forecasts and advice for the OECD's 30 mostly industrialized member counties and a few others such as China, India, Russia and Brazil.

Elmeskov also said the OECD was counting on a Swedish rate rise of half of a percentage point more and a last rise of 25 basis points by the Swiss central bank.

The general thrust of the report was that economic growth was set to lose steam in industrialized nations and continue at a brisk if minimally slower pace in emerging market economies, and that underlying inflation was likely to remain moderate.

The OECD said recent financial market turmoil and a downturn in housing markets was affecting countries differently and Europe less than the United States, even if Ireland, Spain and Britain looked more vulnerable.

Exchange rate shifts were to be expected in such times too and tended to help the adjustment as long as such movements did not become destabilizing forces.

"Recent dollar depreciation is a case in point," it said in an editorial to the report, signed by acting chief economist Jorgen Elmeskov, filling the spot since the recent departure of Frenchman Jean-Philippe Cotis.

(Reporting by Brian Love; Editing by Ruth Pitchford)