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IMF says ECB rate cut not best option
Wednesday, 4th July 2012 08.28am

The European Central Bank (ECB) is better off ramping up its asset purchase program rather than cutting rates when it meets on Thursday, the head of the International Monetary Fund said on Tuesday.

IMF Managing Director Christine Lagarde said while the ECB has room to ease monetary policy, the IMF does not believe it is the best policy given that not all euro zone members need lower interest rates at this time.

The ECB has used its non-standard measures - bond purchases and liquidity operations - to help fight the euro zone debt crisis. Policymakers have deep reservations about reactivating the ECB's controversial government bond buying plan, which has split the ECB's governing council.

"We are not sure this is the best channel at the moment," Lagarde told CNBC when asked about the possibility of a rate cut. "Germany does not need a lowering of interest rates set by the ECB but Italy and Spain do, so you can't dissociate when you use that kind of monetary policy instrument.

"On the other hand, the (ECB) asset purchase program is much more selective and can be used in a more judicious way," she added. ( C) Reuters

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