* ECB determined to act swiftly if required, Constancio says
* Mersch says ECB working on "many instruments"
* Mersch says negative interest rate one tool on the shelf
* Forecasters cut inflation projections in ECB survey
* Euro zone growth weaker than expected in Q1
By Michelle Martin and Karolina Slowikowska
BERLIN/KRAKOW, Poland, May 15 The European
Central Bank is working on a broad range of policy tools and is
determined to act if needed, top ECB policymakers said as
forecasters surveyed by the bank cut their inflation
In Krakow, ECB Executive Board member Yves Mersch said on
Thursday the ECB was working on "many instruments" and a broader
range than journalists or analysts might think.
On Wednesday, Reuters reported the bank was preparing a
package of options for its June 5 meeting, including cuts in all
its interest rates and measures aimed at boosting lending to
small- and medium-sized businesses.
The ECB's main interest rate now stands at a record low of
0.25 percent and the deposit rate it pays banks for holding
their money overnight is at zero. If it cuts the deposit rate,
the ECB effectively would charge banks for holding their cash.
Asked about the possibility of negative interest rates,
Mersch said in Krakow: "It's certainly on the shelf if the
Governing Council decides. It is a tool that is available."
ECB President Mario Draghi said last week the Governing
Council was "comfortable with acting next time" but wanted to
see updated economic projections from the bank's staff first.
An ECB survey of independent forecasters - as distinct from
the bank's staff forecasts - released on Thursday saw them cut
their inflation projections, adding to pressure on the ECB.
"We are determined to act swiftly if required and do not
rule out further monetary policy easing," Constancio said in
The Survey of Professional Forecasters, a survey of 55
economists, academics and other professional forecasters
throughout the euro zone, showed a 2016 inflation forecast of
1.5 percent, down from 1.7 percent three months ago.
Mersch said he favoured speeding up preparations "so that
our instruments are ready".
"But precise (instruments) you will see after the June
meeting. We are working on many instruments," Mersch said. "We
are working on a broader range of instruments than might strike
a journalist, or even an analyst."
Shortly before figures for euro zone first-quarter economic
growth were released, Mersch said: "We are still broadly in line
with our forecast of a fragile recovery."
Data then showed economic growth in the region was much
weaker than expected in the first quarter and inflation remained
stuck below 1 percent in April at 0.7 percent, a modest pick-up
from the previous month.
The European Union's Statistics Office estimated that the
economy of the 18 countries sharing the euro expanded only 0.2
percent during the first three months of the year, rather than
the 0.4 percent growth expected by economists.
"We are now in a situation of a credit-less recovery in the
euro area, with low levels of credit to the private sector",
Constancio said in Berlin.
The sources familiar with measures under preparation for
June told Reuters in Wednesday's story that the tools included a
targeted long-term lending operation, or LTRO, which would come
with conditions attached on achieving a measurable increase of
banks' lending to small and mid-size companies.
"The first need that we need to address is of credit
allocation," said Mersch.
(Writing by Paul Carrel; Editing by Larry King)