IMF urges ECB to take further steps to fight deflation risk: source
June 18th, 2014 by admin

The International Monetary Fund will urge the European Central Bank to increase efforts to ward off the risk of deflation with steps including programs to purchase government bonds, according to a person who has seen the recommendation.

The recommendation, contained in a two-page technical report at the end of an IMF assessment of the euro zone, is in line with similar calls from the fund in the past for the ECB to be more aggressive in easing monetary policy to stimulate growth.

But it is the first time it has repeated the call since ECB President Mario Draghi raised expectations of possible U.S.-style quantitative easing by saying the Frankfurt-based central bank could take further steps after it cut its deposit rate to below zero in June.

“The draft from the euro zone mission restates more strongly the request previously made to the ECB to do more to fight the risks of deflation,” said the source.

“It doesn’t mention ‘quantitative easing’ but it does talk about bond purchasing programmes,” the source said.