LONDON: International Monetary Fund has suggested The European Central Bank to cut interest rates and to keep realizing measures for helping euro-region growth and supporting the banking system.
“Given the broad need for fiscal adjustment, much of the burden of supporting growth falls on monetary policy,” the Washington-based lender said today in its World Economic Outlook.
“The ECB should lower its policy rate while continuing to use unconventional policies to address banks’ funding and liquidity problems.”
In fact, The ECB cut its benchmark rate to a record low of 1% in December and disbursed 1 trillion euros or equivalent to US$1.3 trillion into the banking system to secure the supply of credit to households and companies.
The euro-area economy is projected to shrink by 0.3% in 2012, an improvement from the 0.5% contraction the IMF forecast in January.
Expectedly, the region will grow to 0.9% in 2013, from the previous forecast at 0.8%. (Bloomberg/t01/aph)