A European Central Bank (ECB) interest rate cut cannot be ruled out if the European economy weakens, IMF Managing Director Rodrigo Rato was quoted on Saturday as saying. The ECB had the option of cutting rates, Rato said in an interview with Spanish financial daily Expansion. The interview was held during Rato's trip to Africa in May, before French and Dutch voters rejected the European Constitution, plunging Europe into a political crisis.
Asked if the IMF recommended that the ECB keep open the option of a rate cut, Rato said: "It's not that we've recommended them not to rule it out (the option of cutting rates) ... What we've said is that it cannot be ruled out in the event of greater weakness of the European economy."
The ECB on Thursday flatly rejected calls for a cut in interest rates to help reverse a European economic slowdown.
"It's true that European monetary conditions are loose, and in some countries very loose," Rato said.
"We've never thought monetary policy is responsible for European economic weakness. The ECB is right about that. The bank has been very efficient, in a very short time, in creating a credible monetary policy," he said.
"But monetary policy can play a role in the economic situation at the time or even in expectations. And we think you should not rule out any kind of measure in a situation in which weakness was much greater (than it is now)," he added.
Asked about uneven growth in the eurozone and the view of some economists that a one-size-fits-all monetary policy was not working, Rato said a homogeneous market like the United States could not be built overnight.
"I think you have to learn from the European experience. It's very new and doesn't have too many equivalents," he said.
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