(Bloomberg) --
European Central Bank Chief Economist Philip Lane said there’s still room to cut interest rates further and described a stimulus package that split policy makers as “not such a big package.”
“We see enough scope for further interest-rate cuts, should they be necessary,” Lane said in an interview with German newspaper Handelsblatt published Thursday. “There are some countries, such as Denmark or Switzerland, which have lowered interest rates even further.”
The ECB cut its rate on banks’ overnight deposits to minus 0.5% on Sept. 12 as part of a series of measures that included the resumption of bond purchases. That latter element was opposed by around a third of the 25-member Governing Council, and sparked public dissent from the governors of nations such as Germany, Austria and the Netherlands. Executive Board member Sabine Lautenschlaeger, also German, resigned from her post this week.
Lane’s comments open the door for more action should the 19-nation euro zone, which still faces risks such as a no-deal Brexit and an escalation of global trade protectionism, tip into recession. He said such a downturn isn’t yet in sight and the risk of deflation is low, but “there is widespread agreement on the need to act in this situation; and that is crucial. There were different opinions only on the scope and nature of the measures.”
Denmark and Switzerland, where the central banks focus on controlling the exchange rate, both have policy rates of minus 0.75%.
Lane also said that it’s time for the ECB to revisit its monetary policy framework, as the U.S. Federal Reserve is doing, after years in which ever more stimulus has failed to return inflation sustainably to the goal of just under 2%.
“The world is changing,” he said. “We should analyze the way other central banks behave in terms of their inflation target.”
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