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Investing.com -- The International Monetary Fund (IMF) believes the European Central Bank (ECB) should maintain its current 2% deposit rate unless significant shocks alter the inflation outlook, according to Alfred Kammer, head of the IMF’s European Department.
Speaking on Wednesday at the ECB Forum on Central Banking in Sintra, Portugal, Kammer told Reuters that "risks around euro zone inflation are two-sided."
"This is why we think the ECB should stay the course and not move away from a 2% deposit rate unless there is a shock that materially changes the inflation outlook. Right now we don’t see anything of such magnitude," Kammer stated.
The ECB has reduced rates by two percentage points since June 2024 and has indicated a pause for July, though financial markets still anticipate another cut to 1.75% before the end of the year.
The IMF’s position differs from market expectations partly due to its higher inflation forecast for next year compared to the ECB’s projections. While the ECB expects price growth to fall below its 2% target for 18 months starting from the third quarter, with inflation reaching a low of 1.4% in early 2026, the IMF forecasts inflation at 1.9% for next year.
Kammer explained the difference: "For next year, we see inflation at 1.9%, which is above the ECB’s own projections, partly because we take a different view on energy prices."