Wednesday February 11, 09:33 AM
UPDATE 1-ECB could cut interest rates further-Paramo
MADRID, Feb 11 (Reuters) - The European Central Bank could cut interest rates lower than 2 percent and will continue to provide liquidity to solvent banks, ECB Executive Board Member Jose Manuel Gonzalez-Paramo (Stuttgart: PVW.SG
- news) said on Wednesday.
'A rate of 2 percent is not the lowest rate we can think of, taking into account the situation right now, inflation expecations continue anchored and growth slowdown is intense,' Gonzalez-Paramo said in an interview with Spain's Intereconomia radio.
The ECB held rates at 2.0 percent at its February meeting but policymakers have signalled a cut is likely in March.
Asked if he expected deflation, Gonzalez-Paramo said: 'Not for the moment. We see a scenario of negative inflation, which is different.'
On the subject of whether the European Central Bank would buy assets from banks, he said: 'The European Central Bank has been boosting liquidity by extraordinary means for a year and a half, providing liquidity to solvent banks in the euro zone as a whole. For us this is not at all new.'
'At the moment we are carrying out a monetary policy which is in part conventional, which is what central banks have always done based on interest rates, and in part non-conventional, by providing unlimited liquidity at a fixed interest rate to solvent banks.'
Gonzalez-Paramo said the ECB would not give an opinion on whether countries should set up 'bad banks' to free banks of poor-quality assets, but would only insist that European countries did so in a coordinated fashion.
'The ECB's role here is not so much to ask 'Do you want to create a bad bank or not', but rather to say 'Do it in such a way that you do not create advantages in some countries over others.'
(Reporting by Andrew Hay; Writing by Jason Webb and Sonya Dowsett, editing by Mike Peacock) Keywords: ECB PARAMO/
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