* IMF chief Lagarde warns of "low-growth trap"
* Global growth to rise above 3 percent, still below trend
* Geopolitics, volatile markets also risks to recovery
(Adds comments on Ukraine, explanation of low inflation;
recasts first paragraph)
By Anna Yukhananov
WASHINGTON, April 2 The head of the
International Monetary Fund on Wednesday called on the European
Central Bank to ease monetary policy to move prices higher,
saying "low-flation" in advanced economies risked undercutting
an already sluggish global recovery.
IMF Managing Director Christine Lagarde said the world's
economy should pick up pace to grow more than 3 percent this
year and next. But she said risks, including low inflation in
the euro zone, geopolitical tension in places like Ukraine, and
market volatility, could prompt a prolonged period of sluggish
ECB policymakers meet on Thursday and are not expected to
announce any new measures to fight weakness in the euro zone
economy, despite pressure to act to reverse a drop in the
region's rate of inflation.
"More monetary easing, including through unconventional
measures, is needed in the euro area," Lagarde said in a speech
that outlined the Fund's policy recommendations ahead of its
spring meetings in Washington next week.
The IMF has argued that highly indebted euro zone countries
face a harder task to reduce debts, regain competitiveness and
tackle high unemployment with inflation well below the ECB's
target of close to 2 percent.
Annual price growth in the currency bloc ticked down to 0.5
percent in March, its lowest since 2009, and its sixth month in
what ECB President Mario Draghi has called "the danger zone"
below 1 percent.
Lagarde also urged the Japanese central bank to keep trying
to stimulate that country's economy.
"In 2013, global growth was about 3 percent; we project
modest improvements in 2014 and 2015, although still remaining
below past trends," Lagarde said at the Johns Hopkins School of
Advanced International Studies.
"The risk is that without sufficient policy ambition, the
world could fall into a medium-term low-growth trap," she said.
She warned that geopolitical tensions could hit growth if
they got out of hand. Russia has been in a stand-off with
Western nations over its annexation of the Crimea region,
prompting economic sanctions from the United States and the
"The situation in Ukraine is one which, if not well managed,
could have broader spillover implications," Lagarde said
"Now our hope for the (IMF) program for Ukraine to work ...
is that geopolitical tensions go away, come down, so that that
country and its people can actually recover," she said.
The IMF last week announced a $14 billion to $18 billion
credit line for Kiev in exchange for tough economic reforms that
would unlock further aid from the EU, United States and other
Spillovers are also a risk from the U.S. Federal Reserve's
gradual winding down of its massive monetary easing program,
which has hit emerging markets as investors bet on higher U.S.
Lagarde reiterated the IMF's calls for greater cooperation
among monetary policymakers to limit the impact of the Fed
tapering of its monthly bond purchases, as the problem could
also "spill back" to the United States.
(Additional reporting by Jason Lange; Editing by Chizu Nomiyama
and Paul Simao and Andrea Ricci)