January 26, 2017 / 7:14 PM / in a year

ECB should keep monetary policy loose for extended time

BRUSSELS (Reuters) - European Central Bank President should continue to keep its monetary policy loose, focusing on inflation in the euro zone as a whole, until there is a sustained rise in price growth, the International Monetary Fund said in an assessment.

The document, seen by Reuters, is a regular review of the economy of the 19 countries sharing the euro and was presented by the head of the IMF’s European Department Poul Thomsen to euro zone finance ministers on Thursday.

“We continue to strongly support the ECB’s accommodative monetary stance and its firm commitment to achieve its price stability objective,” the IMF said.

“Subdued underlying inflation and a still negative output gap point to the need for policy to remain accommodative for an extended period,” it said.

The IMF said that the ECB should look through temporary inflation movements, including transitory episodes of above target inflation, and remain focused on its medium-term objective for the euro zone as a whole, which is price growth below, but close to two percent.

“For a sustained recovery of euro area inflation, some countries (such as those where output gaps are mostly closed like Germany), must have inflation above the ECB’s ‘below, but close to, 2 percent’ medium-term objective,” the IMF said.

Reporting By Jan Strupczewski

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