Tuesday, Governing Council member Erkki Liikanen said the European Central Bank still has room for adjusting interest rates. The policymaker, who heads the Bank of Finland, made the comment while presenting the latest economic forecasts for the Finnish economy.
It is worth emphasizing that the European Central Bank has not yet used up all its room for maneuver in its interest-rate policy, he said. The rate setter noted that this applied to all key policy rates.
If the recession becomes further prolonged and the downside risks to price stability increase, it will be necessary for the ECB to broaden its arsenal of non-standard measures and extend the duration of the measures. It is important to keep all options open, Liikanen added.
With regard to the global economy, Liikanen said the economy is now in deep recession and the Bank of Finland does not expect a recovery until first half of 2010.
Further, the policymaker reiterated ECB's stance that it will continue non-standard policy practice for as long as needed, and in any case beyond the end of 2009.
The latest forecast showed that the Bank of Finland expects the Finnish economy to shrink 5% in 2009.
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