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IMF says euro zone should keep supporting economy, high inflation is temporary
Published by maria gbaf
Posted on December 7, 2021
2 min readLast updated: January 28, 2026
Global Banking & Finance Review®
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Published by maria gbaf
Posted on December 7, 2021
2 min readLast updated: January 28, 2026
The IMF advises the euro zone to maintain economic support, viewing current inflation as temporary. Future fiscal plans should be announced now.
BRUSSELS (Reuters) – Euro zone governments should continue to spend to support the COVID-19 economic recovery, though in an increasingly focused way, and consolidate public finances only when it is firmly under way, the International Monetary Fund said on Monday.
In a regular report on the euro zone economy presented to the group’s finance ministers, the IMF noted, however, that while consolidation itself could wait, a credible way of how it would be done in the future should be announced already now.
“Policies should remain accommodative but become increasingly targeted, with a focus on mitigating potential rises in inequality and poverty,” the IMF said.
“Fiscal policy space should be rebuilt once the expansion is firmly underway, but credible medium-term consolidation plans should be announced now,” it said.
The Fund also noted that the rise in inflation, which hit a record high of 4.9% on a year-on-year basis in November, was temporary and, therefore, not a big threat because it did not translate into a spike in wages, called a second-round effect.
“Recent inflation readings have surprised on the upside, but much of the increase still appears transitory, with large second-round effects unlikely,” the report said, adding that the European Central Bank’s monetary policy should therefore continue to be accommodative.
“Structural reforms and high-impact investment, including in climate-friendly infrastructure and digitalization, remain crucial to enhancing resilience and boosting potential growth,” the IMF said.
(Reporting by Jan Strupczewski; Editing by Paul Simao)
The main topic is the IMF's advice for the euro zone to continue economic support amid temporary inflation concerns.
The IMF considers the current rise in euro zone inflation to be temporary and not a significant threat.
The IMF recommends targeted fiscal policies and announcing future consolidation plans now.
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