IMF chief warns low inflation could undermine eurozone growth prospectsJuly 19, 2014 - 15:25 AMT PanARMENIAN.Net - IMF head Christine Lagarde has warned that financial markets maybe a little too upbeat given the persistently high levels of unemployment and debt in European economies. Lagarde also warned that continuing low inflation could undermine growth prospects in the region. However, she did say the European economy was recovering and interest rates should stay low until demand picks up. Last month, the European Central Bank cut its main interest rate to 0.15%. It also cut its deposit rate - the rate it pays banks to keep money on deposit - to -0.1%, becoming the first major central bank to introduce negative rates. ECB chief Mario Draghi has since said interest rates will remain at their current level for an "extended period of time in view of the current outlook for inflation". Inflation in the eurozone is currently 0.5% - the ECB would rather it was close to 2%. "Obstinately low inflation can seriously undermine growth," Lagarde warned in a speech in Paris on Friday, July 18. "Monetary policy should remain supportive until private demand has fully recovered" and the ECB "has achieved its price stability objective." The IMF head said there was some "good news", as the European economy was "recovering from the crisis. "Confidence is improving and financial markets are upbeat, perhaps a little too upbeat," she said. "There is a danger of a vicious cycle - persistently high unemployment and high debt-to-GDP ratios jeopardize investment and lower future growth," she added. Lagarde's comments echo those made by the Bank for International Settlements last month. The Basel-based organization - usually dubbed the "central banks' central bank" - talked of a "puzzling disconnect between the markets' buoyancy and underlying economic developments globally". Top stories Yerevan has dismissed Turkey’s demand to shut down the Armenian nuclear power plant as “inappropriate”. Armenia will loan 2.9 billion drams to Nagorno Karabakh (Artsakh), according to a draft government decision. The Ministry of Ecology and Natural Resources of Azerbaijan has “strongly condemned” Armenia’s decision. Kerobyan has said that for the first time in the history of Armenia, the volume of foreign direct investments amounted to about $1 billion. Partner news | Scholz hopes Armenia-Azerbaijan peace treaty will be signed this year German Chancellor Olaf Scholz hopes that a peace treaty between Armenia and Azerbaijan will be signed this year. Ucom equips four bus stops in Ijevan with free Wi-Fi Ucom now provides free Wi-Fi coverage in smart bus stops in four communities of Ijevan. Armenians stage more campaigns against territorial concessions to Azerbaijan Protesters blocked more roads across Armenia on Friday, April 26 in continuing attempts to scuttle territorial concessions to Azerbaijan. Czech-Armenian military cooperation discussed in Yerevan A delegation led by the Director General for the Industrial Cooperation Division of the Ministry of Defence of the Czech Republic visited Armenia. |