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ECB's Lane says central bank could cut rates in future, will ensure spreads don't hurt policy transmission

after the poorly-received European Central Bank decision, ECB Chief Economist Philip Lane said it retains the option of future cuts in the policy rate, if warranted by a tightening in financial conditions or a threat to its medium-term inflation aim. Lane said an interest-rate cut would not have been as effective in the current situation. "A move in the short-term rate is typically most powerful if it is expected to be persistent, given the importance of the expectations channel in determining the influence of the short-term policy rate on the overall yield curve. This persistence channel is less relevant in the context of the spreading of the coronavirus," he said. Lane also said the ECB would "ensure that the elevated spreads that we see in response to the acceleration of the spreading of the coronavirus do not undermine transmission," following President Christine Lagarde's comment saying it wasn't the central bank's job to close spreads.

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