Further Eurozone rate cuts possible, ECB chief economist Praet says

Further interest rate reductions in the single currency area are possible if the European Central Bank's recently announced barrage of new measures fails to have the desired effect, a top official said at the end of the week.

“We have not reached the physical lower bound. If new 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 armory,” the ECB's chief economist, Peter Praet, told Italian newspaper La Repubblica.

On 10 March, at the press conference in which ECB president Mario Draghi unveiled the monetary authority's latest set of stimulus measures, some he believe he wrong-footed markets with his observation that at the time he did not envisage any future needs for additional policy easing.

Praet added that the latest package of measures "makes sense from an economic point of view,” but needs to remain in place until inflation is headed back towards 2.0% in a sustainable manner.

“It must be sustainable,” he said. “We’re not yet there.”

As of 09:40 euro/dollar was lower by 0.38% to 1.1272.