Reuters
May 12, 2011
ECB policymaker Juergen Stark left little doubt on Thursday more euro zone rate hikes were on the agenda, even as the International Monetary Fund urged the bank to tread carefully to help contain the region's debt woes.
Warning the fiscal crisis could yet spread to core nations in the single currency bloc, the IMF called in its latest report on Europe for broad-based action and "unrelenting" reform efforts from periphery states.
It said it was ready to give Greece more aid if the country needed it and urged the ECB to play its part by taking a cautious approach to interest rate increases, adding the tactic of providing limit-free liquidity to euro zone banks might need to be prolonged.
The fund's European Department Director, Antonio Borges, said that while interest rates needed to rise to more normal levels -- thereby raising sovereign debt servicing costs -- the ECB would have to manage the process with care.
"We need to keep in mind that the recovery in the euro area is under way, but it is not extraordinarily strong or dangerously strong, so there is no reason from that perspective to start tightening (monetary policy) sharply."
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