January 22, 2015 / 4:21 PM / 3 years ago

UPDATE 1-IMF welcomes ECB bond-buying, calls for more policy actions

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WASHINGTON, Jan 22 (Reuters) - The International Monetary Fund on Thursday said it welcomed the European Central Bank’s decision to buy government bonds, which will pump tens of billions of euros into a sagging euro zone economy.

IMF Managing Director Christine Lagarde said the monthly purchases of 60 billion euros should “strongly reinforce” the ECB’s accommodative policies, helping to lower borrowing costs across the euro zone, raise inflation expectations and support the central bank’s mandate for price stability.

The IMF has for at least a year warned about the risk of a prolonged period of low prices in the euro zone - what Lagarde dubbed “lowflation” - and called for the ECB to act in order to boost prices and support a sluggish European recovery.

The ECB on Thursday said it would buy government bonds from this March until the end of September 2016 despite opposition from Germany’s Bundesbank and concerns in Berlin that it could allow spendthrift countries to slacken economic reforms.

“It remains essential that the accommodative monetary stance is supported by comprehensive and timely policy actions in other areas, not least structural reforms to boost potential growth and ensure broad political support for demand management policies,” Lagarde added. (Reporting by Anna Yukhananov; Editing by Chizu Nomiyama)

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