FRANKFURT Key Euribor bank-to-bank lending rates steadied on Tuesday after a European Central Bank policymaker played down chances for any further rate cuts.
ECB Executive Board member Yves Mersch told a newspaper he did not see the logic of a debate about the bank cutting its main rate from the current record low because unconventional tools were working better than conventional monetary policy.
The ECB kept rates on hold this month despite new forecasts suggesting the euro area economy will contract next year as it has this. But Governing Council members have said they held a wide discussion about cutting rates from their current record low of 0.75 percent.
"At the moment we are doing monetary policy above all with unconventional measures because these are working better," the ECB executive board member told German paper the Frankfurter Allgemeine Zeitung. "This is why I do not really understand the discussion about a rate cut."
Expectations that the bank was ready to cut rates in the coming months had driven the lending rates lower earlier in December, fuelled by comments from ECB President Mario Draghi, who had said there had been a "wide discussion" on rates at the policy meeting, at which the ECB kept rates at 0.75 percent.
On Tuesday, three-month Euribor rates EURIBOR3MD=, traditionally the main gauge of unsecured bank-to-bank lending, held steady at 0.184 percent.
The six-month rate ticked higher to 0.318 percent from 0.317 percent while the one-week rate EURIBORSWD= stayed unchanged at 0.077 percent. The overnight Eonia rate EONIA= slipped to 0.071 versus 0.074 percent.
Dollar-priced bank-to-bank Euribor lending rates USDEURIBOR= USDIB3MD= were mixed, with three-month rates flat at 0.55615 percent and one-week rates rising to 0.36154 percent versus 0.34846 percent.
(Reporting by Frankfurt newsroom. Editing by Jeremy Gaunt.)