The European Central Bank (ECB) and other policymakers across the continent need to keep interest rates at current high levels until inflation is sure to be under control, the International Monetary Fund said on Wednesday.
The Fund warned of what it called "premature celebration" as inflation declines after reaching its peak.
The Washington-based Fund stated that the cost of reducing the pace of continued inflation may be painfully high, and may lead to another painful round of raising interest rates, which may deprive the economy of a large share of growth.
The Fund said - in its twice-yearly regional report - that the European Central Bank and other central banks that are not members of the 20-nation euro zone “have reached the peak of their interest rates, while some of them have begun to reduce base interest rates. However, A long-term restrictive stance remains necessary to ensure inflation does not rebound.”
The IMF reported that it usually takes 3 years on average to bring inflation back to lower levels, while some anti-inflation campaigns take longer periods.
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