FRANKFURT (MNI) – It is possible for the European Central Bank to
lower its deposit facility rate from currently 0.25% to 0%, Governing
Council member Ewald Nowotny said in an interview published Thursday.

Nowotny, who heads the Austrian National Bank, told the German
business daily Boersen-Zeitung that such a cut would be technically
feasible and at least ensure that banks “offer money on the interbank
market and not hoard it at the ECB.”

“Indeed, right now there has already been discussion of lowering
the deposit facility,” the paper quoted him as saying. The corridor
between the three ECB interest rates – the deposit facility, the main
refinancing rate and the marginal facility – is flexible, he said.

“Up to now we have not altered the corridor between these three
rates also because we did not want to send any rate-cut signals,” he
said. “But if one is having a discussion about interest rate policy, it
should certainly include all rates.”

Nowotny duly noted that the ECB does not pre-commit with regard to
interest rates. “But the fact is that for the Eurozone this year we
expect negative economic growth and we see that inflation
expectations are very stable and money supply is also only growing
slowly,” he said.

As for another three-year long-term refinancing operation, he said,
“I believe that it is still too early to speculate about the repetition
of such operations.”

Effectively distancing himself from the Bundesbank, which has
criticized the fact that Spain’s banking sector is to receive financial
assistance in the absence of a more general program for the troubled
country, Nowotny said, “We now have to stand behind what has been

He expressed support for a bank union, asserting that the elements
can be implemented in the short term without a discussion about the EU

In many cases, he said, it makes more sense to reach agreements at
the level of the Eurozone rather than the EU.

Frankfurt bureau tel.: +49-69-720142. Email:

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