IMF says euro zone should continue to support economy and high inflation is temporary

BRUSSELS, Dec 6 (Reuters) – Euro zone governments should continue to spend to support economic recovery during the coronavirus pandemic, albeit in an increasingly targeted way, and consolidate public finances only when they are firmly underway, he said. on Monday the International Monetary Fund.

In a regular report on the eurozone economy presented to the bloc’s finance ministers, the IMF noted, however, that while consolidation itself can wait, a credible way of how it will be done in the future should already be announced. .

“Policies must remain expansive, but increasingly focused, focusing on mitigating potential increases in inequality and poverty,” the IMF said.

“The fiscal policy space should rebuild once the expansion is firmly underway, but credible medium-term consolidation plans should already be announced,” he said.

The IMF also noted that the rise in inflation, which reached a record high of 4.9% year-on-year in November, was temporary and therefore not a great threat because it did not translate into a rise in wages, which it is called second round effects.

“Recent inflation readings have come as a surprise to the upside, but much of the rise continues to appear transitory, and large second-round effects are unlikely,” the report said, adding that the European Central Bank’s monetary policy should remain expansive.

“Structural reforms and high-impact investment, including in climate-friendly infrastructure and digitization, remain crucial to enhancing resilience and boosting potential growth,” the IMF said.

(Report by Jan Strupczewski; edited in Spanish by Benjamín Mejías Valencia)

Article Source