IMF: ECB may have only limited room to cut interest rates


In its annual report published this Thursday, the International Monetary Fund (IMF) said eurozone may face a prolonged period of anaemic growth and inflation and announced that it expects the GDP to grow by 1.3% in 2019.

The shared currency seems to be reacting to the IMF's dismal tone negatively with the EUR/USD pair turning flat on the day near 1.1250. Below are some key takeaways from the report as reported by Reuters.

"Sees rising risks for eurozone economy, especially trade tensions, impact of Brexit, Italy's debt woes."

"Undershooting of euro zone's inflation objective calls for prolonged monetary accommodation."

"Euro's real exchange rate as slightly undervalued, urges Germany, other trade surplus states to invest more."

"ECB's intention to maintain ample accommodation for longer is vital."

"ECB should shorten maturity of new TLTRO, offer less generous pricing terms than on TLTRO ii to avoid banks increasing their sovereign exposure."

"ECB's possible tiered deposit rate would have very small impact on aggregate bank profitability and questionable impact on credit conditions."

"Direct costs of negative rates are likely outweighed by their positive indirect effects on aggregate demand and bank profitability."

"If further accommodation required, ECB should consider new asset purchase programme anchored by capital key and possibly broadened to larger set of assets."

"ECB may have only limited room to cut interest rates."

"Further credit easing measures could be considered, including new cheaper liquidity facilities for banks."

"Multiple money laundering breaches at EU banks add urgency to centralised supervision."

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