ECB to keep monetary policy loose for as long as needed

Fri May 17, 2013 8:07am EDT
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By Ingrid Melander

ORLEANS, France (Reuters) - The European Central Bank will keep its loose and growth-supportive monetary policy stance in place for "quite a long time", ECB executive board members said on Friday.

With the euro zone economy stuck in recession, the ECB cut its main refinancing rate to a record low of 0.5 percent and extended its provision of unlimited funds to banks by a year at its May policy meeting,

Inflation fell to a three-year low of 1.2 percent in April, allowing some room for maneuver.

The ECB's Joerg Asmussen told journalists in Berlin the bank's monetary policy would remain expansive for as long as needed.

His colleague Benoit Coeure hit a similar tone when speaking at a conference in Orleans in France, saying the ECB was committed to providing the euro zone with abundant liquidity for as long as necessary.

"We are saying that because we are well aware that rigidities and difficulties of transmission in the euro zone mean that the monetary policy will have to stay accommodative for quite a long time," Coeure said.

The ECB's record low interest rates do not reach euro zone countries evenly because funding costs for banks in the periphery are higher than in the euro zone's core countries. That makes it more expensive for households and companies to borrow.

ECB President Mario Draghi said last week the bank would monitor incoming data closely and would be ready to cut rates again, including the deposit rate currently at zero, which would mean it would charge banks to keep their money overnight.   Continued...

European Central Bank (ECB) Executive Board member Joerg Asmussen attends an interview with Reuters in Berlin, February 22, 2013. REUTERS/Pawel Kopczynski