Published October 10, 2012
TOKYO – A top European Central Bank official on Wednesday pushed back against calls for an ECB interest rate cut, saying ensuring the effective transmission of monetary policy right now was more important for the euro zone than the policy rate.
Christian Noyer, a member of the ECB's Governing Council, also stressed the central bank's resolve to act forcefully when needed under its bond-buying program to keep bond yields of peripheral euro-zone economies from spiking.
"We stand ready to intervene (under the bond-buying program) and believe us, when we do it, we will be successful," Noyer told a briefing in Tokyo on the sidelines of the annual IMF meetings.
In its latest forecasts for the European economy on Tuesday, the International Monetary Fund said there was room for the ECB to lower rates to boost growth, as core inflation in the 17 countries sharing the euro currency was under control.
The ECB's main refinancing rate is now at a historic low of 0.75 percent and economists expect another rate cut this year.
Noyer defended the ECB's decision to keep interest rates on hold, saying that the priority now was on fixing the region's banking system so that the funds injected by the central bank funnel broadly and equally through its economies.
"Basically, our analysis is that the importance of the precise point of the policy rate at the moment is less important than the transmission of our policies," he said.
Noyer said the bond-buying program, as well as progress towards a European banking union, should help allay fears about a breakup of the euro zone.
His comments echoed those of ECB Vice-President Vitor Constancio, who said Europe's progress in dealing with its sovereign debt crisis should encourage countries worldwide that had been worried about spillover effects.
European policymakers proposed earlier this month that the ECB take charge of supervising all banks in the euro currency zone from January, as a first step toward a banking union where euro zone countries would jointly back their lenders.
"In view of all these problems in the euro area, we have been providing I believe very powerful support," Noyer said. "The causes of the crisis are being addressed."
(Reporting by Leika Kihara; Editing by Tim Ahmann)