* Weidmann says nothing has been decided yet
* If action needed, bank would turn to interest rates first
* Current debate more about deposit than refinancing rate
* Not in favour of targeted exchange rate policy
* "No need for government bond purchases" given low yields
(Adds detail and further comments)
FRANKFURT, May 21 It is not clear yet whether
the European Central Bank will take fresh policy action at its
upcoming June meeting, ECB Governing Council member Jens
Weidmann has said.
Analysts in a Reuters poll expect the ECB to cut what little
it has left of its main interest rate in June and push the
deposit rate below zero in an attempt to stop the euro from
rising and inflation from falling any further.
Weidmann told the Sueddeutsche Zeitung newspaper the ECB's
loose monetary policy stance was appropriate to support the
recovery, but its risks and side effects should be kept in mind,
according to advance excerpts of an interview due to appear in
"The interest rate policy is the core of our monetary policy
instruments. A central banker's attention would certainly focus
first on this, if in the end it became necessary to act,"
Weidmann was quoted as saying. "But so far it is not clear
whether we will have to act at all."
ECB President Mario Draghi said after the May meeting that
the Governing Council was "comfortable with acting next time" -
its June 5 policy meeting - but wanted to see updated economic
projections from the bank's staff first.
Fresh policy action did not depend on current inflation
rates, but on how prices developed over the medium term,
Weidmann said, adding that there were no signs that the euro
zone was in a deflationary downward spiral.
"Nothing has been decided yet," Weidmann said.
NO NEED FOR GOVERNMENT DEBT PURCHASES
Citing ECB sources, Sueddeutsche Zeitung said the central
bank was considering cutting the interest rate on deposits below
its current level of zero to -0.1 percent, which would mean
charging banks to park their cash at the ECB.
Weidmann said the current debate focused less on the main
refinancing rate and more on the deposit rate. A negative
deposit rate could revive the interbank money market, encourage
lending to companies and affect the exchange rate.
The ECB has gotten increasingly concerned about the strength
of the euro and its impact on already low euro zone inflation.
Weidmann called for a calmer debate, saying the euro-dollar
exchange rate had several times in the past been at similar
levels and on a trade-weighted basis, it was only just above the
level seen at the beginning of the currency union.
"An expansionary monetary policy can certainly - as a side
effect - lead to a weaker euro exchange rate. But I am not in
favour of a targeted exchange rate policy to weaken the euro,"
Weidmann, who also heads the Bundesbank, was quoted as saying.
Asked about government bond purchases by the ECB, Weidmann
made clear that he had not changed his position recently,
stressing that euro zone central banks were not allowed to
finance governments and should interpret their mandate narrowly.
"In addition to that, there are now more than ever economic
reasons not to buy government bonds," Weidmann said, referring
to government bond yields in some periphery euro zone countries
falling to record lows in recent months.
"Why should the ECB intervene in these markets now and try
to push the rates even lower?," Weidmann asked. "The current
market environment already has the effect of a government bond
(Reporting by Eva Taylor; Editing by Kevin Liffey/Ruth