* Nowotny says variety of options under review
* His preference for unconventional steps is boosting ABS
* Says focus should be on core inflation
(Adds quotes and background)
VIENNA, April 7 The European Central Bank has no
immediate need to take steps to counter stubbornly low inflation
because a strengthening of Europe's economy should reduce the
danger of deflation, ECB policymaker Ewald Nowotny said on
He told reporters the ECB was watching developments closely
as it weighed whether further steps including unconventional
measures might be warranted.
"It does not mean that steps are to be taken immediately,
rather that one prepares for all eventualities," he said.
Should unconventional measures be needed, Nowotny said he
preferred strengthening Europe's asset-backed securities (ABS)
market. But he added that a range of measures was under review
and that no sequencing of steps was being considered.
The European Central Bank opened the door on Thursday to
turning on its money-printing presses to boost the euro zone
economy and keep inflation from staying too low.
"In my personal view I prefer measures that are as close as
possible to the market. That means in my view the first measure
is a strengthening of the ABS market in Europe," he said, adding
this could directly boost prospects for financing small and
mid-sized companies while having a positive monetary policy
"This doesn't mean that other things are ruled out in
principle, but my personal focus would be on this area."
He said a further rate cut was not ruled out but questioned
"if a rate cut now really has an impact or perhaps whether other
measures perhaps are more effective".
Nowotny noted that core inflation in Europe had held
relatively stable even as headline consumer prices in the euro
zone were up only 0.5 percent, well below the ECB's target of
close to but below 2 percent.
"The low inflation rates are very significantly driven by
developments in energy prices, over which the ECB has very
limited influence - if at all via the exchange rate," he said.
"Therefore I believe that in this situation the aspect of
core inflation is the more important," he said, noting that
strong wage increases in key countries like Germany this year
should help address low inflation, especially in the services
(Reporting by Michael Shields; Editing by Hugh Lawson)