European Central Bank ready to cut interest rates
Friday, April 17, 2009
Euro-zone inflation was confirmed at an all-time low of 0.6 percent in March, and the bloc's industrial production plummeted in February underlining the depth of the downturn and adding to pressure for the ECB to ease policy.
Despite the news, ECB policymaker Erkki Liikanen said there were signs of the economy stabilising, although he added it was too early to draw definite conclusions. ECB Executive Board member Jose Manuel Gonzalez-Paramo also reiterated that the bank would lay out new measures next month.
He did not give details of the measures, but made a point of saying the ECB had so far focused its efforts on banks.The comments echoed those of ECB Governing Council member Axel Weber who on Wednesday said ECB measures should concentrate on the clogged up banking sector, rather than capital markets.
Following a steady stream of hints over the past weeks analysts expect the Frankfurt-based central bank to extend the length of time it lends banks cash up to 1year from a current six months.
They are also speculating whether the ECB will follow the U.S. Federal Reserve, the Bank of England and the Bank of Japan down the path of asset purchases. Asked if the central bank was prepared to buy corporate debt, Gonzalez-Paramo said it would do what was needed.
"It (ECB) has always taken necessary action, including increasing the size of our balance sheet to 6 percent of euro zone GDP," said Gonzalez Paramo. "Up till now, our non-conventional measures have been concentrated on the banking sector, which provides 70 percent of euro zone private sector financing."
Labels: Economy and Business
posted @ 10:47 AM,
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