European Central Bank will have to simplest lower rates of interest another time this yr, IMF Europe head says

The European Central Bank will have to simplest enact another quarter share level rate of interest lower this yr in spite of wider dangers to financial expansion, the International Monetary Fund’s Europe leader stated Wednesday.

“We have a very clear recommendation for the ECB, what we saw so far is a huge success in the disinflation effort and monetary policy has worked … so we are expecting to sustainably hit the 2% inflation target in the second half of 2025,” Alfred Kammer, director of the European division on the IMF, advised CNBC’s Carolin Roth.

“Our recommendation is there is room for one more 25 basis point cut, in the summer, and then the ECB should hold that 2% policy rate unless major shocks hit and there is a need for recalibrating monetary policy,” he added.

Kammer’s feedback got here all the way through an interview at the sidelines of the IMF-World Bank Spring Meetings.

The ECB has lowered charges seven occasions in quarter level increments in its newest cycle, beginning in June 2024. Its maximum fresh transfer decrease used to be remaining week, taking the deposit facility, its key price, to 2.25%.

Inflation within the euro space cooled to 2.2% in March.

ECB President Christine Lagarde advised CNBC in a Tuesday interview that the disinflation procedure within the euro zone used to be “nearing completion,” even though stressed out that dangers remained — in particular given the unsure panorama during which U.S. price lists loom — and that the central financial institution can be “data dependent to the extreme” going ahead.

Kammer advised CNBC the IMF had made a “meaningful downgrade” in its expansion outlooks for plenty of evolved economies.

For the euro space, Kammer stated price lists and industry tensions weighed extra closely at the outlook than had been offset by means of fresh tendencies at the fiscal aspect, together with expectancies for larger spending on protection and infrastructure in Germany to spice up expansion within the bloc.