European Central Bank (ECB) board member Christian Noyer downplayed market expectations that the Eurozone monetary authority cut interest rates by the end of the year saying that a decision to this effect was not currently a pressing issue.

Noyer explained that if a 25 basis point (bp) cut resulted in a 150 bp increase in lending rates, "then there's little advantage in moving the rates". He said he believed that the ECB needs to first deal with this "transmission problem" and, once that is fixed, "we shall see whether the rates are appropriate. But it's really not a major issue at the moment."

Noyer also highlighted the importance of the Eurozone banking union, hailing it as the only way to break the link between sovereign risk and the banks. "We of course need a unified banking system ... we need to have the capacity to step in without the involvement of individual member states," he said.

But Noyer didn't attempt to hide the difficulty in creating such a system and noted that even "if we were able to decide on (a) framework" it could take a year to establish the system. Yet, he was quick to show the ECB's commitment to the process: "We shall continue to take all of the necessary action to fulfill our mandate and contribute to the success of this tricky but necessary period of transition towards a more coherent, stable and dynamic economic and monetary union," he concluded.

JM

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