According to a report from the Wall Street Journal "the European Central Bank could adopt negative interest rates or purchase assets from banks if needed to lift inflation closer to its target", a top ECB official said.
"If our mandate is at risk we are going to take all the measures that we think we should take to fulfill that mandate. That's a very clear signal," ECB executive board member Peter Praet said in an interview Tuesday with The Wall Street Journal.
"If our mandate is at risk we are going to take all the measures that we think we should take to fulfill that mandate. That's a very clear signal," ECB executive board member Peter Praet said in an interview Tuesday with The Wall Street Journal.
Annual inflation in the euro zone slowed to 0.7% in October, far below the central bank's target of just below 2% over the medium term. The euro dipped briefly after the comments appeared on the Journal's website.
Mr. Praet didn't rule out what some analysts see as the strongest, and most controversial, option: purchases of assets from banks to reduce borrowing costs in the private sector.
"The balance-sheet capacity of the central bank can also be used," said Mr. Praet, whose views carry added weight as he also heads the ECB's powerful economics division. "This includes outright purchases that any central bank can do."
Additional stimulus from the ECB isn't needed right now, Mr. Praet signaled, noting that inflation risks for the euro zone as a whole are balanced after last week's unexpected ECB interest-rate cut.
Some of the countries hit hardest by the euro zone's debt crisis, including Ireland, Greece, Cyprus and Spain, have inflation rates of zero or lower.
The ECB could do more if necessary, Mr. Praet said. "On standard measures, interest rates, we still have room and that would also include the deposit facility," he said.
The central bank's deposit rate has been set at zero for several months. Making it negative would effectively levy a fee on commercial banks that park funds at the ECB.
That would be aimed at spurring bank lending to the private sector, which would boost growth and inflation. However, a negative deposit rate would also weigh on bank profits.
"For some decisions it's easier than others" to gain consensus, Mr. Praet said. "One thing is clear: the Governing Council has been able to decide. That's really the message."
The need for more aggressive stimulus is increasingly being debated by economists and investors.
