It is time for historic European Central Bank rate cuts to be passed on by banks to the euro zone economy, ECB president Jean-Claude Trichet says, suggesting the central bank might mark a pause in cuts.
The ECB has cut its main lending rate by 1.75 percentage points in two months, for the first time in its 10-year history.
'Now we have to get it in the real economy, Trichet said last night during a dinner with media in Frankfurt.
ECB rate cuts began as part of a coordinated action with other central banks on October 8, and were followed by two more in early November and December, to leave the bank's benchmark at its present level of 2.5%.
Other ECB directors have also suggested the bank might now be planning to wait before further lowering the cost of borrowing in the euro zone next year.
Many economists expect the benchmark lending level to fall to between 1.5% and 2% by the end of March.
Trichet acknowledged the ECB governing council had considered cutting the rate dramatically to get commercial banks to start lending to each other again. But, he added that the bank has never taken its main rate below 2% in the past.
Trichet called again on commercial banks to do their part by using relaxed monetary conditions and other measures taken by the ECB to jumpstart lending.
'They have to be taken into account by financial institutions as part of their new environment', Trichet said.
