FRANKFURT (AFX) - IMF managing director Horst Koehler said the European Central Bank should cut interest rates to boost both the euro zone and the world economies at a critical period.
Speaking in an interview with Capital magazine released this morning, Koehler said a rate cut from the ECB would not endanger its mandate to maintain price stability.
"In the current critical phase for the euro zone and world economies, lower interest rates in Europe would certainly help, without endangering the ECB's stability policy", he said.
The ECB has so far resisted calls from Koehler and other leading policy makers to cut rates, saying risks to price stability have yet to disappear.
An interest rate cut from the ECB would both create an important signal in Europe and show worldwide monetary policy does not have divergent aims, Koehler said.
However, Koehler added that although a world financial crisis cannot be excluded, the probability of it occurring is very small. Although the shape of the U.S. slowdown has turned out to be worse than feared, the signs remain mixed, with consumer confidence holding up well and stable prices continuing, he said.
"We really have no reason to get worked up about apocalyptic crash scenarios", he said.
On the euro, Koehler said he remains optimistic over the long term future for the embattled currency, despite its disappointing performance so far this year.
He said its current weakness may be linked to huge amounts of deutschmarks being exchanged into U.S. dollars across eastern Europe amid concerns about the effects of the introduction of euro notes and coins next year.