European Central Bank (ECB) President Jean-Claude Trichet said yesterday that interest rates in the eurozone would not be reduced to zero and rejected suggestions of a rift at the bank.
“This zero rate policy would not be appropriate in our own case,” he told a news conference in Tokyo.
The ECB earlier this month lowered its key lending rate by a quarter point to a record low 1.25 percent and Trichet said at the time that a further “measured” reduction was possible.
The US and Japanese central banks have lowered their main lending rates to virtually zero, while the Bank of England has slashed official borrowing costs to a record-low 0.5 percent to fight a deepening recession.
The ECB has disappointed some investors who wanted deeper interest rate cuts to revive the ailing eurozone economies.
Trichet reiterated that the ECB would unveil new unorthodox measures to tackle the economic downturn when its governing council meets next month.
“We have a rendezvous May 7 and we will decide on further non-standard measures,” he said.
The ECB chief said that the bank had already adopted new tools such as providing commercial banks with unlimited amounts of cash at fixed interest rates.
The ECB has so far been reluctant to follow the example of its counterparts in Japan, the US and Britain, which have programs to buy corporate bonds aimed at bringing down market interest rates.
Some ECB officials, such as vice president Lucas Papademos, have suggested the bank could follow its peers in buying corporate bonds to ease credit market tensions, fanning talk of a split between policymakers.
Trichet, however, brushed aside such suggestions.
“There is no split in the governing council. We have a very, very united governing council,” he told reporters. “I would warn you against over-interpretation of what is being said by my colleagues.”