‘ECB toolkit includes rate cuts, more QE’

Bloomberg

The European Central Bank (ECB) is willing to cut interest rates, resume bond purchases or strengthen its promises to keep borrowing costs low if necessary to battle economic weakness, policy maker Olli Rehn said.
“The Governing Council is determined to act and stands ready to adjust all of its instruments, as appropriate,” Rehn, who heads Finland’s central bank, said in Helsinki. He also said the ECB’s economic analysis at its policy meeting last week showed that the external risks to the euro area won’t fade in the near term.
Rehn, who is considered a contender to succeed ECB President Mario Draghi in November, has repeatedly called for a review of the strategy for achieving price stability. He said the euro zone’s economic slowdown and a drop in market-based inflation expectations have hampered progress towards the goal of inflation just under 2 percent.
He said any rate cuts could be accompanied by “possible mitigating measures” — a reference to the debate over whether some bank reserves should be exempt from the negative deposit rate. Banks have complained that their profitability is being squeezed, and Draghi has said he’ll consider whether that could force them to pare back lending.