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IMF again calls for ECB stimulus to head off deflation

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IMF again calls for ECB stimulus to head off deflation
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International Monetary Fund head Christine Lagarde is again pushing for the European Central Bank to do more to head off dangerously low inflation in the eurozone.

Fearful that deflation will hit output and consumer spending she would like to see stimulus measures.

“More monetary easing, including through unconventional measures, is needed in the euro area,” IMF Managing Director Christine Lagarde said in a speech that outlined the Fund’s policy recommendations ahead of its spring meetings in Washington next week.

Lagarde sees a mixed picture for the region’s recovery: “In the euro area, a modest recovery is now taking hold, [it is] stronger in the core and still very weak in the south. There are encouraging steps we have seen in the last few months, the establishment of a banking union.”

At their monthly meeting on Thursday, ECB policymakers are not expected to announce any new measures to fight weakness in Europe’s economy.

In her speech Lagarde also warned the recovery from the global financial crisis remains weak.

“In 2013, global growth was about 3 percent; we project modest improvements in 2014 and 2015, although still remaining below past trends,” Lagarde said at the Johns Hopkins School of Advanced International Studies.

“The risk is that without sufficient policy ambition, the world could fall into a medium-term low-growth trap,” she added.

As well as slow price growth in the eurozone, she cited geopolitical tensions in places like Ukraine, and market volatility as factors that could drag on growth in the short-term.