RPT-ECB's Stark: see weak growth, possible negative inflation

(Repeats story without changes)

FRANKFURT Nov 5 (Reuters) - Euro zone growth will be very weak well into 2009 and oil price fluctuations could push inflation briefly into negative territory, European Central Bank Executive Board member Juergen Stark was quoted on Wednesday as saying.

But Stark told Germany's Financial Times Deutschland newspaper he saw no threat of a deflation spiral in the 15-nation region which would further damage the real economy.

The ECB would use all instruments at its disposal, including interest rates, to tackle the situation, he said, in comments in line with expectations for the ECB to cut rates again on Thursday.

"The expectation that we would see a recovery around the end of the year has disappeared," Stark told the paper in an interview conducted last week but published on Wednesday. "We will have very low growth well into 2009."

The ECB cut rates by 50 basis points on Oct. 8 to 3.75 percent and most analysts expect another move of at least that magnitude on Nov. 6 in response to slumping economic growth and fading inflation worries.

Stark said the inflation outlook had changed dramatically, with significantly lower pressure from commodity prices, although he dismissed the threat of a deflation spiral.

"If you see the enormous fluctuations in oil prices then inflation could be in negative territory for one or two months because of base effects," he said. "But negative inflation rates are not for me deflation in the sense of a downwards spiral in the general price level, which also effects the real economy."

Weaker growth meant there would probably not be many knock-on effects from past commodity price rises in the coming months and quarters, he said.

Asked if further rate cuts could help in the current environment, Stark said: "It can help to signal that we are ready to use all instruments at our disposal in this situation -- and the central instrument is interest rate policy, when our mandate allows it."

Inflation, which the ECB aims to keep below 2 percent, has eased from a peak of 4 percent over the summer and most analysts expect the ECB to keep cutting rates as consumer price gains slow further [ECB/INT]. Stark said there were so far no signs of a credit crunch but since October the situation had changed for banks, "and because of that we can expect to see a more restrictive credit allocation."

The ECB is due to publish the results of its latest bank lending survey on Friday, which will show how lending has reacted to the intensification of the financial crisis. (Reporting by Krista Hughes)