IMF chief Christine Lagarde said on Monday the fund sees a risk of an extended period of low inflation in the euro zone and that central bankers must be poised to act so that it does not derail an incipient economic recovery.
"What we are seeing is low inflation and if it happens for an extended period of time it could potentially de-anchor the expected anticipation by the consumers ... about longer-term inflation," International Monetary Fund Managing Director Lagarde said at an economic forum in the northern Spanish city of Bilbao.
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"We're saying that the potential risk is out there. We range that risk at 15-20 pct, which is why we recommend that central bankers guard against it and have available the tools that could respond to that in terms of monetary policy," Lagarde said in answer to a question from the public at the forum.
(Reporting by Paul Day, Writing by Fiona Ortiz; Editing by Julien Toyer)