September 23, 2011 / 8:06 PM / 8 years ago

IMF would support ECB rate cut as growth slows

WASHINGTON, Sept 23 (Reuters) - The International Monetary Fund would support an ECB interest rate cut as euro zone growth is slowing sharply while there are practically no inflation expectations, the head of the IMF’s European department said.

After two rate rises in the first half of the year which took borrowing costs up to 1.5 percent, the ECB has signaled a pause in the tightening cycle but many economists expect the bank’s next rate move would actually be a rate cut.

The IMF seemed to share this sentiment.

“Monetary policy might be less focused on inflation,” Antonio Borges told a news conference.

“Inflationary fears right now are practically non-existent; it may make it possible to have a more expansionary monetary policy. Many people expect this to happen and, if it does happen, we will be very supportive of that,” Borges said.

The European Commission expects quarterly economic growth in the 17 countries using the euro to slow to 0.1 percent quarter-on-quarter in the third and fourth quarters from 0.2 percent in the second and 0.8 percent in the first.

“The economic situation has become much less favourable,” Borges told a news conference.

“Even the best economies are slowing down significantly, which is certainly worrying,” he said. (Reporting by Jan Strupczewski, Editing by Andrea Ricci)

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