2 October 2001, 12:20  ECB's Issing says Sept 17 rate cut was an 'exceptional response'

FRANKFURT (AFX) - The European Central Bank decision to cut its interest rate on Sept 17 in coordination with the US Federal Reserve was an "exceptional response" to an "unusual situation" after the terrorist attacks and does not signal the ECB was turning away from its own strategy, ECB chief economist Otmar Issing said in an interview with Handelsblatt. Issing said the ECB is not an institution which clings solely to the principles of price stability without taking into consideration what goes on elsewhere in the world. He said the ECB has lately been criticised because it has cut interest rates amidst a climate of increasing prices. But he said central banks must also take into consideration the psychological impact of certain measures. "Here lies an important reason why we, in concert with the Americans, reduced interest rates on Sept 17," he said. He said based on pure economic grounds, the interest rate cut could have also been made at the next regular meeting of the ECB Governing Council. The rate cuts were also in accordance with the bank's strategy and estimates that the risks for the medium-term developments in prices would diminish. "We have reacted with an exceptional response to an exceptional situation," he said. "We wanted consciously to give a signal. This is and was an exceptional case and not the start of a turning away from our strategy," he added. On Sept 17, the ECB cut its rates a few hours after rate cuts by the Federal Reserve in the US. The ECB had said then its rate cut was taken "in concert" with the Fed's decision.

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