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Europe’s healthy economic outlook will most likely prompt the European Central Bank to raise interest rates again in the near future, the International Monetary Fund said Tuesday.
And the economic outlook continues to be positive, with the IMF predicting the gross domestic product across the 13-country euro-zone to rise 2.6 percent this year and a further 2.5 percent next year.
It said that the economy is “doing well” due to sound policies and helpful outside influences.
However, it stressed the need for the European Central Bank to raise interest rates again before the end of the year. Rates have been raised 1 percent in the last year and 2 percent since December 2005.
Although inflation was reported to be below Europe’s target rate of about 2 percent on Tuesday, it still seems likely that the ECB will hike rates again in September.
It is thought the extent of any rise will hinge on salary rises, product prices and increases in productivity. However, the growing strength of the euro points towards another quarter percent rise, rather than anything higher.
Meanwhile, the IMF praised euro-zone governments for decreasing budget deficits, boosting employment, but said increased competition was needed to boost productivity growth.
It reiterated its belief that a unified euro-zone financial services sector would go a long way towards boosting productivity levels.
Meanwhile, unemployment was down to 6.9 percent in June in the euro-zone, a little more than expected and down almost 1 percent from this time last year.
22:33
Posted on Aug-01-2007
