WASHINGTON (Reuters) -The European Central Bank is not considering bond purchases or other extraordinary stimulus measures because it still has room to cut interest rates, ECB chief economist Philip Lane said on Thursday.
The ECB has been cutting rates for nearly a year now after taming a post-pandemic surge in inflation, and some market economists have begun speculating on whether it may also resume buying bonds to keep longer-term borrowing costs in check.
Lane dismissed that prospect but left the door ajar for bigger rate reductions in an environment of great economic uncertainty, such as the one created by the sweeping tariffs unveiled by U.S. President Donald Trump’s administration.
“Whether it’s asset purchases, targeted longer-term refinancing operations, and the rate forward guidance and negative rates for that matter, they’re in the toolbox,” Lane told a conference at the Peterson Institute for International Economics in Washington.
“But you only use them when you run out of space in terms of the policy rate … We’re still away from the lower bound. We have a clear hierarchy.”
The ECB cut rates earlier this month after Trump’s global tariffs lowered the immediate outlook for growth and inflation, including via a stronger euro and cheaper fuel costs.
Lane said there was no single right way of dealing with economic uncertainty, and the ECB might cut rates more slowly or quickly depending on the circumstances.
“If you say, uncertainty means … you go more slowly or you go in smaller steps, (that’s) sometimes true,” Lane said. “In other configurations … to grapple with the uncertainty, you go big. So I think to be able to say that baseline is not the only guidance, I think it’s super important.”
Finland’s central bank governor, Olli Rehn, also said earlier on Thursday that the ECB did not decide a priori the appropriate level of rates or the size of its moves.
(Reporting by Francesco Canepa; Editing by Paul Simao)
