The head of the International Monetary Fund's European department has said euro zone interest rates are fine for the moment but may need to be cut if economic growth fails to pick up in the third quarter of the year.
Michael Deppler, speaking in a telephone conference with journalists, said the IMF's long-held view was that a euro exchange rate somewhere in the range of $1.20 to $1.30 was 'about right'.
The recent slippage towards $1.20 was probably helpful to Europe's exporters but the region needed to consider that global imbalances - a reference to US deficits - meant there were risks in the longer-term, he said, alluding to risks of dollar weakness.
Deppler was following up on an IMF report on Monday that said inflation was contained and heading downwards, and that euro zone interest rates might need to be cut if the economy in the region showed further weakness or the euro rose.
Earlier, European Central Bank president Jean-Claude Trichet told a banking conference in Beijing that European interest rates were currently 'appropriate' and that any move, either up or down, could lead to higher lending costs.
The ECB's chief economist Otmar Issing said on Monday that he did not rule out a possible reduction of euro zone interest rates.
