The European Central Bank (ECB) is considering several options including a floor for its benchmark interest rate to fight the recession, said Nout Wellink, a member of its governing council.
“That’s one of the possibilities,” Wellink, who is also head of the Dutch central bank, said in an interview late on Saturday in Washington. “When you have reached a certain level then you can influence reactions of economic agents by saying we will keep it at that level for a certain period.”
SPLIT
The ECB’s 22 council members appear split over how to counter the worst economic slump since World War II, at a time when the bank’s main rate is already at a record low of 1.25 percent. Germany’s Axel Weber has said the bank shouldn’t cut the rate below 1 percent. Others, including Athanasios Orphanides of Greece, want to keep open the option of deeper rate reductions and have argued in favor of asset purchases.
DELAYED DECISION
The debate prompted the Frankfurt-based ECB earlier this month to lower its key rate less than economists had forecast, by a quarter point, and to delay a decision on new policy tools until the council next meets on May 7.
The Federal Reserve and Bank of England have already cut lending rates close to zero and are buying government and corporate debt to bolster their economies.
The Bank of Canada this week cut its key rate to 0.25 percent and said it plans to leave it there for more than a year.
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