IMF upgrades Eurozone growth forecasts, backs ECB rate policy

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FRANKFURT, June 2 (AFP): The International Monetary Fund (IMF) upgraded today its forecast for Eurozone growth this year and said it agreed with the European Central Bank's policy of keeping interest rates stable at 4.0 per cent.

The IMF said it now expected the 15-nation Eurozone economy to expand by "around 1.75 per cent in 2008 and 1.25 per cent in 2009."

In April the Fund had cut its growth forecast to 1.4 per cent and 1.2 per cent owing to the ongoing global financial crisis.

On Monday it also said that inflation should "gradually return to below 2.0 per cent in late 2009," from a record of 3.6 per cent in May, with high commodity and fuel prices and possible wage increases meaning "it is appropriate to keep policy rates on hold."

Most recently, the IMF had joined its voice to those who suggested the ECB had room to lower its main interest rate to underpin slowing Eurozone growth.

Commenting on the central bank's 10th anniversary, the IMF said that "monetary union is a distinct success."