IMF: "ECB Rate Cut Appropriate... Fed Should Be Cautious"

The International Monetary Fund (IMF) has evaluated the European Central Bank's (ECB) decision to cut its benchmark interest rate as "appropriate." However, it advised the U.S. Federal Reserve (Fed), which is set to decide on interest rates next week, to "exercise caution in the coming months."

[Image source=Reuters Yonhap News]

According to major foreign media, IMF spokesperson Julie Kozack stated at a regular news briefing on the 6th (local time) that "there has been significant progress in inflation in Europe." On the same day, the ECB cut its benchmark interest rate and other key policy rates by 0.25 percentage points each. This marks the ECB's first policy rate cut in about five years since September 2019.

Spokesperson Kozack emphasized that the IMF had been recommending the ECB to lower rates since before June. She also said, "It is important for the ECB to maintain a data-dependent approach and a meeting-by-meeting approach."

At the same time, she stressed that the U.S. Fed should be cautious about cutting rates. Kozack pointed out that despite cumulative tightening, the U.S. economy has shown "surprisingly strong resilience," and "first-quarter inflation indicators were generally higher than we expected." She added, "This shows that there will be difficulties as the U.S. works to bring inflation back to target levels," and "it reinforces the need for the Fed to be cautious and data-dependent in policy decisions over the coming months." The Fed is scheduled to hold the Federal Open Market Committee (FOMC) meeting on the 11th and 12th.

Additionally, the IMF recommended fiscal soundness to member countries. Kozack said, "Despite the resilience of the global economy, many countries continue to struggle with large fiscal deficits," and "now is the time to begin fiscal consolidation."

This content was produced with the assistance of AI translation services.