IMF forecasts Eurozone growth to slow to 1.3% in 2019, then rebound to 1.6% in 2020. Inflation is forecast to be at 1.3% in 201 and remain far off ECB’s 2% target at least until 2022. it urged that ECB’s monetary policy stimulus was “vital” as Eurozone was facing “a prolonged period of anemic growth and inflation”. And, “the undershooting of the inflation objective calls for prolonged monetary accommodation.”
IMF expected more monetary easing could be necessary if inflation expectations worsen. However, it also raised doubt on the idea of tiered deposit rate in case of more monetary easing. It said “a regime of tiering… would have a very small impact on aggregate bank profitability and a questionable impact on credit conditions.”
