2023-04-28 06:37:19
The Fund is also asking European countries to reduce their budget deficits and the size of their inflation support schemes to support the movement.
By Le Figaro with AFP
Posted update
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European central banks mustkill the beastof inflation, without being tempted to make a “pausein raising interest rates, said Friday the director of the International Monetary Fund (IMF) for Europe. “We have to go kill this beast. If potentially you start taking a break, throwing a party prematurely, history is full of examples where you need a second try to rein in inflation and you do damage to the economy a second time.“, Pleaded Alfred Kammer, during a press briefing on the European economy organized in Stockholm.
To control a global inflationary wave, but particularly strong in the United States and Europe, Western central banks have raised their interest rates considerably since last year, causing a slowdown in the global economy and concerns for the banking sector. At a time when inflation is slowing on both sides of the Atlantic, the IMF calls, however, for continued efforts to contain the surge in prices as a priority.
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“Sound” banking system in Europe
For the European Central Bank (ECB), which has already raised its interest rates to their highest level since October 2008, within a range of 3% to 3.75%, this should translate into “any further» of rate hikes for «Longer“, estimated Alfred Kammer. This monetary tightening policy of the ECB must last “until mid-2024, in order to bring inflation back to its target (of 2%, editor’s note) somewhere in 2025“, according to the German economist. For the IMF, the need to slow inflation takes precedence over concerns about the banking and financial system, which it believes can withstand the strains. “And there’s no debate about it“, estimated Alfred Kammer. “We believe that the banking system must be able to manage the stress coming from this side“, he said.
Despite the concerns caused by the recent failures of the American bank SVB or the Swiss giant Crédit Suisse, “in Europe, we have a healthy, well capitalized, highly regulated and well supervised banking system“, justified the head of the IMF. In addition to the efforts of central banks, the Fund is also calling on European countries to reduce their budget deficits and the size of their inflation support measures to accompany the movement.
Asked about the risks to growth, Alfred Kammer pointed out that unemployment remained low in Europe and that the European economy “was at full capacity“. As for wages, so far there has been no runaway observed with the rise in prices. “So far we have seen rather moderate increases (…) and there is some room for wage increases“, estimated the economist.
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