ECB may print more cash

The President of the European Central Bank (ECB), Jean-Claude Trichet, has opened the door to the ECB following the Bank of England and the US Federal Reserve into a policy of "quantitative easing" or printing money.

Although the ECB Council disappointed markets by cutting rates by a less than expected quarter percentage point, to 1.25 per cent, focus centred on Trichet's remarks on the possibility of "unconventional measures" when rates eventually do find a floor, which he suggested would be relatively soon.

Trichet said "I would say very candidly as regarding the main policy rate that it is not the lowest limit. I do not exclude we could in a very measured way go down from the present level".

The hints on quantitative easing will have been welcome to British Prime Minister Gordon Brown and US President Barack Obama as they have tried to persuade eurozone powers of the need for a more comprehensive macroeconomic stimulus.

The euro jumped against the dollar, falling back later as scant details of what might be proposed emerged. Trichet said the ECB is looking at "optimising what could be done and should be done to enhance credit support".

Economists took that to mean the ECB might not purchase government securities but rather private-sector debt.

- INDEPENDENT