The International Monetary Fund has urged the European Central Bank to keep euro zone interest rates low for some time, and to be ready to deploy a 'more forceful signal' if needed.
The IMF recognised 'some tentative signs of improvement' in the recession-hit euro zone and called for co-ordinated action by governments to clean up the banking system.
Given that inflation was widely expected to stay well below the ECB's 2% target level for the rest of this year and next, the IMF said interest rates should stay low.
It welcomed the ECB's rates policy and what it called 'far-reaching unconventional measures to support liquidity and credit', and urged the central bank to persevere.
'The benefits of further cuts in the policy rate need to be weighed against their possible adverse impact on the functioning of money markets, but any potential margin for further reductions ought to be used as soon as possible,' the IMF report said.
The ECB's main rate stands at 1%, compared with 4.25% last October, while comparable US rates are at 0-0.25%. British rates at 0.5% and Japan's rate is 0.1%.
The ECB flooded the euro zone banking system last month with a massive €442 billion of one-year money in a further attempt to boost lending to companies and consumers and support activity.
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