Interesting article is WSJ that will lead us not to fix.
IMF Economist: ECB Need Not Hike Rates
ISTANBUL -- The European Central Bank has little reason to raise rates over the next 12 months because of a muted inflation outlook, a senior economist at the International Monetary Fund said Monday.
Central banks have welcomed the boom in asset prices during the past six months. They hope wealth effects lift growth. But they might not welcome the real message investors are sending: expect inflation, and a lot of it.
"The ECB can, as far as we can see over the next year, maintain a very accommodative monetary policy," Joerg Decressin, the head of the IMF's department for global economic studies, told Dow Jones Newswires in an interview.
Consumer prices in the euro zone are likely to rise 0.3% in 2009 and 0.8% in 2010, fresh IMF forecasts showed Thursday. Such an outcome would be well below the ECB's goal of keeping the annual inflation rate at just below 2% over the medium term.
Speaking on the sidelines of IMF and World Bank meetings in Istanbul, Mr. Decressin called for a "staggered exit" by European governments from special measures to stimulate economic activity. Coordination does not mean that "we are all going to hike rates and lower deficits at the same time" -- that's because different EU governments face different challenges, he said.
Turning to Germany's economic outlook, Mr. Decressin said that there are still "slight downside risks" to the country's economic outlook.
The IMF forecast that the euro zone's largest economy will contract by 5.3% this year, before returning to modest growth of around 0.3% in 2010.
"The economic recovery doesn't yet stand on solid feet" and there is a risk that rising unemployment and slack demand may cause further credit defaults, Mr. Decressin said.
Against this backdrop, Germany's incoming coalition government should continue to support the economy, but there is currently "no need to initiate addition fiscal stimulus," the IMF economist said.