by Szu Ping Chan
The European Central Bank is prepared to slash interest rates deeper into negative territory if the economic outlook deteriorates, according to its chief economist.
Peter Praet insisted that the central bank had not run out of ammunition as he left the door open to pumping cash directly into the real economy through so-called “helicopter drops”.
“If new negative shocks should worsen the outlook, or if financing conditions should not adjust in the direction and to the extent that is necessary to boost the economy and inflation, a rate reduction remains in our armoury,” he told Italian newspaper La Repubblica.
“We have not reached the physical lower bound [on rates].”