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 | European Parliament to discuss repression in Azerbaijan The European Parliament will discuss repression of civil society in Azerbaijan on April 24 PACE wants concessions from Azerbaijan to accept Baku back A PACE co-rapporteur said that Azerbaijani authorities must make certain concessions so that the country can return to PACE. Cyprus parliament honors Armenian genocide victims Acting House President Zacharias Koulias noted that April 24 marks the “black anniversary” of the Armenian genocide. Armenia PM, France envoy discuss regional matters Issues related to the consistent development of Armenia-France cooperation were discussed. |