ECB's Mersch: next meeting could yield combination of policies, implementation may vary

TOKYO Wed May 28, 2014 6:00am EDT

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TOKYO May 28 (Reuters) - A European Central Bank meeting next week could yield a combination of policies to tackle low inflation and low credit growth, but the timing of the implementation could vary, ECB Executive Board member Yves Mersch said on Wednesday.

Mersch, speaking to reporters in Tokyo, also said that if the ECB were to cut rates, it would want to maintain the differential between all three of its main rates.

Mersch also said he does not see deflation on the horizon, but the central bank is preparing for this contingency just in case.

The ECB has signalled its readiness to take more steps at its policy meeting on June 5 to counter low inflation and weak lending.

One of the tools on its shelf is an injection of cheap long-term funds with pricing linked to an increase in net lending.

Another option would be to cut interest rates, including the deposit rate, which currently stands at zero. A negative deposit rate would mean charging banks for parking their money at the ECB overnight. (Reporting by Stanley White; Editing by Chris Gallagher)

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