HELSINKI (MNI) – Of all the economic stimulus measures introduced
to combat the financial crisis and the recession, interest rate cuts by
central banks would most likely be cited by ordinary citizens as the
most helpful, European Central Bank Governing Council member Erkki
Liikanen said in a newspaper interview to be published Monday.
The rate cuts have “increased purchasing power remarkably. Probably
because of them consumer expectations have on average remained good
despite the steep drop in the economy,” Liikanen, who heads the Bank of
Finland, told the Finnish daily newspaper Maaseudun Tulevaisuus.
Liikanen said the effect of rate cuts has been even stronger in
Finland, where short-term interest rates tended to be higher. He also
noted that short-term reference rates can rise fast when economic agents
expect them to and he cautioned that people should be prepared for it.
“We don’t talk about future rate decisions beforehand,” Liikanen
added. “They are made taking into consideration the current expectations
of the economic situation.”
He noted the lesson from the Greece situation is that interest
rates on debt of EU countries can diverge when budgets are not kept
under control. He urged governments to keep a firm hand on their public
finances.
He said he was confident that the EU’s Economic and Monetary
Affairs Commissioner Olli Rehn, a fellow citizen of Finland, would
succeed in his efforts to get countries to toe the line on their budget
deficits.
“He will have to struggle though,” Liikanen predicted, “since the
member countries have the last word rather than the European
Commission.”
[TOPICS: M$$EC$,M$$CR$,M$X$$$,MGX$$$]
