GENEVA, Oct 9 (Reuters) - European Central Bank interest rates are “appropriate for the euro zone economy as a whole” and a weak growth outlook supports the bank’s readiness to ease policy if needed, a top ECB policymaker said on Wednesday.
Benoit Coeure said ECB staff forecasts for a euro zone contraction this year and timid growth of just 1 percent in 2014 “justify an easing bias to future monetary policy decisions.”
Abandoning its traditional policy of never pre-committing on future rates, the ECB said in July it would keep its interest rates at present or lower levels for an “extended period” - its first use of so-called forward guidance.
The ECB’s main interest rate is at a record low 0.5 percent.
“By lowering short-term interest rates and signalling, through forward guidance, our willingness to keep rates low for an extended period of time, we are aiming to reactivate the real economy and to avoid the deflationary pressures that can undermine the fragile recovery of the financial intermediaries,” Coeure said.
Reporting by Emma Farge; Writing by Paul Carrel