ECB stimulus encouraged
The European Central Bank should maintain a “firmly accommodative” monetary policy for an “extended period”, the International Monetary Fund said on Tuesday, as it forecast inflation remaining below target.
As the ECB prepares for a decision in autumn on whether to claw back its stimulus programme, the IMF said calls for an exit from easy-money policy were “premature” because consumer prices were not increasing enough.
In its annual report on the euro zone, the IMF estimated euro zone inflation will reach 1.6% this year before slowing to 1.5% in 2018, below the ECB target of below but close to 2%.
The forecasts were actually stronger than the ECB's latest one, released in June, which predicted the bloc's inflation rate at 1.5% this year and 1.3% in 2018.
“The costs of a long period of inflation undershooting continue to exceed those of a temporary overshoot,” the IMF said.
“The calls from some quarters for an exit from monetary accommodation are therefore premature,” it added. Germany has been the biggest critic of ECB's €2.3 trillion ($2.7 trillion) money-printing programme.
To help a sustained recovery of inflation, the IMF encouraged Germany and other euro zone's countries with high growth to push for “robust” wage and price rises, even if this could bring domestic inflation beyond the 2% limit for a limited period.
Germany, the bloc's largest economy, should also increase public investments, a move that could stimulate growth and structural reforms in weaker euro zone's countries, such as Italy, it said.
At the same time, Italy and other high-debt countries should take advantage of the recovery to carry out reforms and build buffers against future shocks, the IMF recommended.
The IMF upgraded on Monday its output growth projections for the euro zone to 1.9% this year, and to 1.7% in 2018.
NAMPA/REUTERS
As the ECB prepares for a decision in autumn on whether to claw back its stimulus programme, the IMF said calls for an exit from easy-money policy were “premature” because consumer prices were not increasing enough.
In its annual report on the euro zone, the IMF estimated euro zone inflation will reach 1.6% this year before slowing to 1.5% in 2018, below the ECB target of below but close to 2%.
The forecasts were actually stronger than the ECB's latest one, released in June, which predicted the bloc's inflation rate at 1.5% this year and 1.3% in 2018.
“The costs of a long period of inflation undershooting continue to exceed those of a temporary overshoot,” the IMF said.
“The calls from some quarters for an exit from monetary accommodation are therefore premature,” it added. Germany has been the biggest critic of ECB's €2.3 trillion ($2.7 trillion) money-printing programme.
To help a sustained recovery of inflation, the IMF encouraged Germany and other euro zone's countries with high growth to push for “robust” wage and price rises, even if this could bring domestic inflation beyond the 2% limit for a limited period.
Germany, the bloc's largest economy, should also increase public investments, a move that could stimulate growth and structural reforms in weaker euro zone's countries, such as Italy, it said.
At the same time, Italy and other high-debt countries should take advantage of the recovery to carry out reforms and build buffers against future shocks, the IMF recommended.
The IMF upgraded on Monday its output growth projections for the euro zone to 1.9% this year, and to 1.7% in 2018.
NAMPA/REUTERS
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