YEREVAN, July 22. /ARKA/. IMF head Christine Lagarde has warned financial markets against being too optimistic amid high rates of unemployment and debt in European economies, vestifinance.ru reports.
She also pointed out the continuing low inflation could undermine the region’s growth prospects.
At the same time, she stressed that the European economy was recovering and interest rates should stay low until demand picks up.
Last month, the European Central Bank cut its main interest rate to 0.15%. It also cut its deposit rate – the rate it pays banks to keep money on deposit – to -0.1%. ECB head Mario Draghi has said interest rates will remain unchanged for an extended period of time in view of the current outlook for inflation. Inflation in the eurozone is currently 0.5% – the ECB would rather it was close to 2%.The main problem of the eurozone is the lending mechanism’s operation, not inflation. This mechanism is in a desperate state now, six years after Lehman Brothers’ bankruptcy, mainly because of the lack of demand for loans.
It means that Draghi’s any attempt to clean the money pipeline by using NIRP projects, QE or something else is doomed to failure, according to zerohedge. –0–
