FRANKFURT, Nov 8 Reuters Rapid wage growth in the euro zone could keep inflation elevated longer and the European Central Bank should hold interest rates at or near record highs through next year to extinguish price pressures, the International Monetary Fund said on Wednesday.

The ECB broke a streak of ten straight rate hikes last month, fuelling market expectations that its next move will be a cut, possibly as soon as April, with a total of 90 basis points of reductions priced in by the close of next year.

Pushing back on early rate cut bets, Alfred Kammer, the head of the IMF39;s European Department, argued that the ECB39;s deposit rate should stay close to its record high 4 level through all of next year.

Monetary policy is appropriately tight and needs to remain so in 2024, Kammer told a news conference. For all intents and purposes, the deposit rate should be held at that level or close to that level throughout 2024.

Kammer warned the ECB against cutting rates too soon because that would require even more costly policy tightening later on.

It is less costly to be too tight rather than to be too loose, Kammer said. What we also want to avoid is premature celebrations.

Inflation soared to over 10 a year ago but has been on a steady downward path since, even if the last mile of disinflation is seen the toughest and could still take two years to get from around 3 to 2.

While the IMF sees price growth back at target in 2025, an exceptionally tight labour market…