ECB's Coene expects no more interest rate cuts

BRUSSELS Fri Nov 15, 2013 7:01pm EST

Belgium's Central Bank Governor Luc Coene presents the bank's annual report in Brussels February 19, 2013. REUTERS/Eric Vidal

Belgium's Central Bank Governor Luc Coene presents the bank's annual report in Brussels February 19, 2013.

Credit: Reuters/Eric Vidal

BRUSSELS (Reuters) - The European Central Bank does not believe that it should cut interest rates any further, Governing Council member Luc Coene told a Belgian newspaper.

The ECB reduced its main refinancing rate to a record low of 0.25 percent last week.

"In the immediate future, the most important effect will be to lower the cost of funding for banks that use financing of the Eurosystem. For the future, we do not think that more should be done," Coene said in an interview with business daily L'Echo published on Saturday.

Coene said October's euro zone inflation figure of 0.7 percent year-on-year had persuaded the Governing Council to act, although some members had preferred to act later.

"There was a consensus on the direction to take. Only the timing was the object of discussions. There was a clear majority not wanting to take the slightest risk. As soon as the first signs of deflation occur, it is already too late to do something. We are avoiding playing with fire," he said.

Coene said the situation within the euro zone was calmer now after three years of crisis.

"But we are far from having pulled through. The vulnerability of the system to external shocks remains significant," he said.

"The biggest problem on the financial markets is a lack of confidence. This inevitably has an impact on the real economy. The creation of a supervisory control at the European level could help to restore confidence. That is certainly my hope."

(Writing by Philip Blenkinsop)

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