ECB's Stark: Rate cuts were not a panic measure

FRANKFURT (Reuters) - Last week's co-ordinated rate cut by central banks was not a panic measure and euro zone inflation could ease close to two percent in the second half of 2009, European Central Bank Executive Board member Juergen Stark was reported as saying on Tuesday.

"The possible interpretation of financial markets that it was a panic reaction by central banks because there could be worse to come, would be wrong," Stark said in an interview in German business paper Boersen-Zeitung.

"Rate cuts are never just hot air, they have a medium term effect. It is important and right that we sent a clear and powerful signal to markets: we are ready and in a position to act jointly if we deem it necessary."

Euro zone inflation, which saw the bank hike rates as recently as July, could also come back in line quicker than previously expected, he added.

"The ECB council has reason to believe that the inflation rate will get considerably closer to what we define as price stability in the second half of 2009 again," Stark said.

Previously, ECB policymakers had said inflation might not slow to its target of just below two percent until 2010.

(Reporting by Marc Jones, editing by Dave Graham)