IMF: Inflation can hit euro growth

Paris - IMF chief Christine Lagarde warned on Friday that low inflation could damage growth in Europe and urged the European Central Bank to maintain a flexible policy.

“Obstinately low inflation can seriously undermine growth,” said Lagarde, who recently hinted that the 3.6 percent global growth forecast for 2014 may have to be trimmed.

International Monetary Fund Managing Director Christine Lagarde speaks during a conference about the future of the Euro zone organized by the Robert Schuman foundation in Paris July 18, 2014. The head of the International Monetary Fund warned on Friday that financial markets were "perhaps too upbeat" because high unemployment and high debt in Europe could drag down investment and hurt future growth prospects. Credit: Reuters

But the “good news,” Lagarde said, was that “European economies are beginning to emerge from the crisis.”

She said: “We are seeing this in a certain number of indicators. We are also seeing this in the very positive orientation of markets, perhaps a little too positive in respect to fundamentals.” - Sapa-AFP