(Reuters) - The European Central Bank has room to cut base interest rates below their current record low of 0.75 percent if the economic situation in the crisis-hit euro zone warrants it, Governing Council member Jozef Makuch said on Tuesday.
The ECB kept its main refinancing rate at 0.75 percent at its September policy meeting, but said the bloc's economy would probably contract more this year than it previously expected.
Makuch's comments echoed those of fellow Council member Luc Coene who signaled earlier this month that any rate moves would depend on how circumstances and the economy develop.
"When it comes to lowering of interest rates, there is of course mathematically room for that ... Whether the ECB will do so will be assessed at its future meetings," Makuch told reporters as the Slovak central bank published new forecasts.
"It will be based on the current situation and future (economic) outlook ... It makes no sense to speculate whether October, November, December."
He said the ECB had no objections to charging banks for depositing cash overnight but that there was no reason to speculate about such a move at present.
"This does not mean there will be a negative interest rate, there is also a possibility to narrow the corridor," Makuch said, referring to the interest rate differential between the ECB's deposit and marginal lending facilities for banks, currently 0.00 percent and 1.50 percent respectively.
"But again, it makes no sense to speculate what will happen." The ECB said this month it will launch a new and potentially unlimited bond-buying program - with strong conditionality - to lower borrowing costs for euro zone strugglers such as Spain, seen as next in the line for an international aid package.
"Spain alone must decide whether it will need to seek help and the fact that whether the ECB bond-buying program shall be launched will not be a factor (in its decision))," Makuch said.
"Spain, in the first place, must consider other criteria originating from the state of the Spanish economy," he added.
Makuch said his personal opinion was that the ECB should cease buying bonds immediately if an aid recipient breaches set and agreed commitments.
reuters.com
The ECB kept its main refinancing rate at 0.75 percent at its September policy meeting, but said the bloc's economy would probably contract more this year than it previously expected.
Makuch's comments echoed those of fellow Council member Luc Coene who signaled earlier this month that any rate moves would depend on how circumstances and the economy develop.
"When it comes to lowering of interest rates, there is of course mathematically room for that ... Whether the ECB will do so will be assessed at its future meetings," Makuch told reporters as the Slovak central bank published new forecasts.
"It will be based on the current situation and future (economic) outlook ... It makes no sense to speculate whether October, November, December."
He said the ECB had no objections to charging banks for depositing cash overnight but that there was no reason to speculate about such a move at present.
"This does not mean there will be a negative interest rate, there is also a possibility to narrow the corridor," Makuch said, referring to the interest rate differential between the ECB's deposit and marginal lending facilities for banks, currently 0.00 percent and 1.50 percent respectively.
"But again, it makes no sense to speculate what will happen." The ECB said this month it will launch a new and potentially unlimited bond-buying program - with strong conditionality - to lower borrowing costs for euro zone strugglers such as Spain, seen as next in the line for an international aid package.
"Spain alone must decide whether it will need to seek help and the fact that whether the ECB bond-buying program shall be launched will not be a factor (in its decision))," Makuch said.
"Spain, in the first place, must consider other criteria originating from the state of the Spanish economy," he added.
Makuch said his personal opinion was that the ECB should cease buying bonds immediately if an aid recipient breaches set and agreed commitments.
reuters.com
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