IMF: ECB May Gradually Ease Monetary Policy Based on Future Data

The International Monetary Fund (IMF) indicated that the European Central Bank (ECB) may gradually ease its monetary policy stance based on forthcoming data, noting that inflation in the Eurozone is trending towards the target.

In a statement, the IMF shared preliminary findings from its Article IV consultation on the Eurozone economy.

The statement highlighted that the Eurozone economy is gradually recovering from the impacts of the COVID-19 pandemic, the disruption of natural gas supplies by Russia, and the war in Ukraine, while inflation is moving closer to the target.

The IMF projected moderate growth for this year, which is expected to strengthen further in 2025. However, it cautioned that the medium-term outlook remains challenging.

The statement also predicted that inflation will return to target in the second half of 2025, adding, “The ECB may gradually ease its monetary policy stance based on future data.”

The IMF noted that the European Union’s (EU) new economic governance framework will require continued political support to be effectively implemented across many member states. It also emphasized the need for policymakers to maintain financial stability in the Eurozone and to expand the macroprudential toolkit.

The statement pointed out that an aging population and slowing productivity growth negatively impact the medium-term outlook. Intensifying geopolitical tensions, trade disputes, and distorted industrial policies could further complicate economic prospects and policymaking in the highly trade-dependent region.

Meanwhile, IMF Managing Director Kristalina Georgieva remarked in an interview with CNBC that Europe’s economic performance is strengthening and that inflation is clearly on a downward trend.

Georgieva stressed that there is no time to lose for the Eurozone to focus on productivity, suggesting that Europe appears to be a “market of ideas” for the United States.

source: prepared by Melisa Beğiç

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