The European Central Bank should raise interest rates further if economic recovery in the 12-nation eurozone continues, International Monetary Fund chief Rodrigo Rato was quoted as saying on Saturday.
"Provided the economic recovery continues, the ECB must move from more of a loose monetary policy to a neutral one, and this means further interest rate increases," Rato told Germany's Welt am Sonntag newspaper, according to an advance copy of an interview to be published on Sunday.
"Nonetheless, given that labour costs and inflation expectations are developing moderately, the ECB can afford to proceed with caution," he added, noting that financial and not just monetary policy had a key role to play at present. "During a phase as good as we're seeing at the moment, there really shouldn't be any more deficits."
Since December 2005, the ECB has increased its key lending rate by 100 basis points to 3 percent, and many economists expect a further rise to 3.5 percent by the end of this year. Separately, he said there was a risk that globalisation could grind to a halt because a number of countries were failing to open up their economies to competition from without.