UPDATE 2-IMF chief urges ECB to keep policy loose, even do more

WASHINGTON, Jan 17 (Reuters) - The European Central Bank should keep monetary policy easy and perhaps try to lower borrowing costs further to help the euro zone's struggling economy, the head of the International Monetary Fund said on Thursday.

The euro zone is still struggling to get the upper hand on a debt crisis that helped push the currency bloc into recession last year for the second time since 2009.

Christine Lagarde, the IMF's managing director, said it could be a year before international lenders can judge whether Greece, the epicenter of the debt crisis, is delivering on its commitments.

With the region suffering from tighter credit, Lagarde said the ECB might have to ease monetary policy.

"Continued if not further monetary easing will be appropriate in order to sustain demand," Lagarde told a news conference in Washington.

She said world leaders have avoided economic collapse in many parts of the globe, but said they must not become complacent.

"It's important to follow through on policies to put uncertainty to rest," Lagarde said.

Even though "there is a bit of recovery in sight" following the severe financial crisis, "it's not time to relax," she said. "We should avoid the relapse."

Giving an example of policy actions that are still required, Lagarde said more fiscal consolidation is needed in Portugal.

She also said the United States must cut government spending over the medium term, and she called the prospect of a higher inflation target in Japan a "good and interesting project," so long as it is associated with central bank independence.