Interest rates have reached bottom for now - ECB's Nowotny

Friday 06 June 2014 14.46
Central banks' work was never over, claims ECB Governing Council member Ewald Nowotny
Central banks' work was never over, claims ECB Governing Council member Ewald Nowotny

The European Central Bank does not intend to cut interest rates further "for the foreseeable time" after lowering them to record lows yesterday, ECB Governing Council member Ewald Nowotny said today. 

He reiterated that the ECB did not have an exchange rate target for the euro.

He added that it had no intention to intervene to cap its strength, which he described as evidence that the euro zone debt crisis was now over. 

He declined to interpret ECB President Mario Draghi's comment that the ECB's job was not yet done, saying only that central banks' work was never over.

Meanwhile, the Vice President of the European Central Bank said today that the bank's interest rates would remain at their record low levels for an extended period of time and that more action would come if needed.

"Interest rates will stay low, in this case stable, for an extended period of time," Vitor Constancio said at an event in London.

He also said the ECB needed the inflation and growth rates to improve to help reduce the debt overhang in the currency bloc.

In Germany, Mario Draghi's bid to jump start Europe's economy by pushing interest rates to record lows has been greeted with dismay. His policy was denounced as a "risky therapy" that could fuel US-style asset bubbles and discourage reform in crisis-hit euro states.
              
Juergen Stark, a former European Central Bank board member who quit in 2011 in protest at the crisis policies of Draghi's predecessor, Frenchman Jean-Claude Trichet, accused the Italian of "targeting specific countries" - presumably slow-growing southern ones - at the expense of the euro zone as a whole.
              
"This is an attempt, one could say a desperate attempt, to get credit flowing again, but the structural problems of these countries won't be solved this way. 
              
"The ECB is clearly moving in the direction of fiscal policy fine-tuning, towards a sectoral or regional monetary policy so to speak. This is not its job and it is departing from the idea of a single monetary policy for the entire currency area," Mr Stark told German radio station Deutschlandfunk.