BERLIN Nov 23 European Central Bank Executive Board member Joerg Asmussen said on Saturday the ECB, which cut interest rates to a record low earlier this month, was ready to take further action if necessary and instruments at its disposal included negative deposit rates.
The ECB slashed its main refinancing rate to 0.25 percent at its meeting on November 7 after inflation in the single currency bloc eased to 0.7 percent in October - well below the ECB's target of close to but just below 2 percent for the euro zone.
"We will take further action if it is necessary to ensure price stability in the whole of the euro zone," Asmussen said at a conference organised by German newspaper Sueddeutsche Zeitung in Berlin.
A negative deposit interest rate was "theoretically a possible instrument", he said, but added that he would be very cautious in using this instrument.
"We discussed it in the ECB Governing Council meeting and are technically in a position to do it but I've always said I'd be very, very careful with this instrument," he said, adding that he would not, however, rule it out in principle.
The ECB's president, Mario Draghi, raised the possibility after the central bank's last policy-setting meeting of applying negative rates but has since downplayed it.
Asmussen reiterated that the ECB would keep its monetary policy expansionary for as long as necessary but he cautioned against using non-standard measures for fear of making people think that the ECB was more pessimistic about the single currency bloc's situation than it actually was.
"We have a range of standard measures on the interest side as well as non-standard measures that we can use if we need to."
"But I don't think it's sensible to fall into activism every day as that would create the impression we consider the economic situation in the euro zone to be worse than we actually do."
He also said monetary policy was no substitute for structural reforms. German finance minister Wolfgang Schaeuble said this week the European Central Bank's loose monetary policy risked giving governments an incentive to slow their reforms.
Speaking at the same event, Deutsche Bank's co-chief executive, Juergen Fitschen, warned about the consequences of keeping interest rates low for too long.
He said he understood that monetary policy was currently seen as an instrument that could generate growth and reduce the financial burdens on countries but added: "Those who believe they can solve problems with a sustained period of cheap money cannot be helped."