IMF MEETING IMF's Deppler sees scope for restrictive rates in euro area |
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Sat, 14 Apr 2007 19:36
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LONDON (Thomson Financial) - Interest rates in the euro area may have to become restrictive if the current economic recovery continues, an IMF director said.'There is scope for some cautious tightening beyond the simple withdrawal of the stimulus,' should the economy continue its expansion, said Michael Deppler, director of the European department at the IMF.The European Central Bank, which Thursday left its benchmark interest rate unchanged at 3.75 pct, has described its monetary policy as being still 'on the accommodative side'. It is expected to raise rates in June.'We don't know where the demarcation line is between withdrawal and restrictive rates, but we are approaching that zone for sure,' said Deppler.'If we see growth continue at above potential rates and to see some sign of that in inflation, then in our judgement there would be a case for going beyond withdrawal,' he added.Deppler played down the importance of the strong euro for the sustainability of the euro area recovery. He noted that exports are strong, the current account is balanced, and overall economic growth is robust.'The euro is at about the right level for a sustained (economic) recovery in the euro area,' Deppler said.He said that structural reforms have paid off, but that more work remains to be done in boosting productivity.'It is essential to the sustainability of the good times that countries maintain a medium-term focus in their policies and not let better times sidetrack them from addressing the enduring challenges they face - ageing, rigidities, and inefficiencies,' Deppler said.carlo.piovano@thomson.comcp/ppCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
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IMF does not see strong euro as threat to economic recovery 