One of the governors of the European Central Bank, France's Christian Noyer, says the ECB has already taken unorthodox 'quantitative easing' measures to boost the economy and is ready to do more if needed.
An ECB decision to pump huge amounts of cash into the euro zone banking system that was renewed last week had taken the ECB into 'non-standard monetary policy,' Noyer told the Financial Times in an interview today.
'It is a way of doing quantitative easing, certainly,' said Noyer, who is also head of the Bank of France.
Quantitative easing describes how a central bank, having already cut interest rates to effectively zero, will then create cash to pump directly into the financial system in the hope of boosting demand.
The Bank of England recently took a first step down this track, creating £75 billion sterling to buy government bonds from commercial banks who then have more cash on hand to lend and invest.
ECB head Jean-Claude Trichet recently suggested that the ECB was ready to look at what further measures it might take to get the recession-hit economy going again after slashing interest rates to a record low 1.5%.
ECB policymakers believe the importance of their decision to lend unlimited amounts of cash to commercial banks at fixed rates has been underestimated.
Noyer, who as head of the Bank of France sits on the ECB board of governors, said the ECB would not rule anything out for the future. The ECB governor also pointed to signs that the bank's policies had begun to work.
'Market and lending interest rates are continuing to move nicely downwards,' Noyer said. 'We need some time for all that to feed through into the economy,' he added.
Noyer noted that very short-term market interest rates were now very close to the 0.5% the ECB pays commercial banks that deposit money overnight.
'As a consequence, the rates effectively paid by euro zone borrowers are much closer to the situation in the US or UK than most people would imagine,' he said.
The US Federal Reserve and Japan have essentially cut their main rates to zero while the BoE's is at an all-time low of 0.5%.
