Bloomberg News

ECB’s Liikanen Says No Floor to Main Rate, CNBC Reports

February 26, 2012

(Updates with Liikanen comments from second paragraph.)

Feb. 24 (Bloomberg) -- European Central Bank council member Erkki Liikanen said there’s no floor to the bank’s benchmark interest rate, CNBC reported, citing an interview.

The bank has “never said” that “there’s a floor,” said Liikanen, who also heads the Bank of Finland in Helsinki. “I’m sure that we will never say so. There are no tactical obstacles to go further.”

The Frankfurt-based ECB has reduced its key rate to a record low of 1 percent, compared with the Federal Reserve’s rate target of zero to 0.25 percent. The ECB has ensured liquidity on the markets, lending 489 billion euros ($651 billion) on Dec. 21 to banks for three years, with the next such allotment set for Feb. 29.

ECB President Mario Draghi said on Feb. 9 officials didn’t discuss a rate change at their latest rate meeting. The euro area economy will shrink 0.3 percent this year, the European Commission forecast yesterday.

“Everything of course depends on the analysis of the economics side and monetary and credit side,” Liikanen said, according to CNBC. “On the other hand of course, the closer you go to zero your margin starts to get limited. That’s pure common sense.”

There’s no risk of inflation accelerating at the moment, Liikanen said, according to CNBC.

--Editor: Jonas Bergman, Tasneem Brogger

To contact the reporter on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net


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