European Central Bank's chief economist Peter Praet says interest rates could go ever lower

 
Jessica Morris
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Frankfurt City Feature
Praet said that rates are yet to reach their lower limit (Source: Getty)

The European Central Bank's chief economist Peter Praet has said the bank can take interest rates even lower if the Eurozone economy fails to pick up.

Speaking to the Italian newspaper La Repubblica, Praet said that rates are yet to reach their lower limit.

"As other central banks have demonstrated, we have not reached the physical lower boundary," he said.

Praet added that if "negative shocks should worsen the outlook or if financing conditions should not adjust in the direction and to the extent that is necessary to boost the economy and inflation, a rate reduction remains in our armoury."

His view contrasts with that the ECB chief Mario Draghi who has said he doesn't expect further rate cuts. This angered some investors who believed he was reneging on a previous commitment to "do whatever it takes".

Frankfurt recently cut its benchmark interest rate to zero per cent from 0.05 per cent, and slashed the deposit rate facility to 0.4 per cent.

It also upped its bond purchase programme from €60bn a month to €80bn, added corporate debt, and offered a new round cheap loans to banks that must be lent to the real economy.

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