ECB's Praet says interest rates could go lower

The euro falls in response...

ECB's Praet says interest rates could go lower

Picture by: Reed Saxon / AP/Press Association Images

Peter Praet, executive board member of the European Central Bank (ECB), has said that there is still scope for the ECB to cut interest rates even lower.

If new negative shocks were felt that could damage the Eurozone's outlook, further moves into negative territory could be on the cards.

Praet told La Repubblica: "We have not reached the physical lower bound”.

Following the comments, the euro fell for the first time in four days.

Investors experienced mild panic last week when ECB President Mario Draghi suggested that the central bank's latest monetary action was testing the limits of what they could do.

He said: "Rates will stay low, very low, for a long period of time... Does it mean we can go as negative as we want without any consequences for the banking sector? The answer is no".

Yesterday, Draghi once again called on governments to push through structural reforms to help the European economy.

Draghi told reporters:

"I made clear that even though monetary policy has been really the only policy driving the recovery in the last few years, it cannot address some basic structural weaknesses of the Eurozone economy.

"For that you need structural reforms, mostly driven to raise the level of demand, public investments and lower taxes. Even more importantly, one needs clarity on the future of our... monetary union".