ECB's monetary policy to stay expansive as long as needed-Asmussen

Reuters

BERLIN (Reuters) - The European Central Bank will keep monetary policy in the euro zone expansive for as long as necessary and central banks around the world should coordinate on exiting from such policies, ECB Executive Board member Joerg Asmussen said on Thursday.

The ECB abandoned its tradition of never pre-committing on future moves in July and said it would keep interest rates at record lows for an extended period and may yet cut further in its first use of so-called 'forward guidance'.

"We have an expansive monetary policy and it will remain expansive as long as necessary," Asmussen said at an event organised by the American Chamber of Commerce in Berlin.

He said the euro zone was not yet ready for the ECB to end this policy and added there was a need for central banks to coordinate on monetary policy as changes in one region's stance could have spillover effects elsewhere.

"We need very clear communication so that the markets are not surprised... and we need global coordination," he said, adding the Bank for International Settlements (BIS) or the Group of Seven industrial nations would be a good forum for this.

Earlier this month the markets had expected the US Federal Reserve to announce it would slightly reduce its bond-buying programme and were then surprised when the central bank postponed an end to the stimulus.

Asmussen warned that the United States was heading towards the upper limit of its debt ceiling again but said he was convinced it would find a pragmatic short-term solution.

However, he said such short-term solutions were not sufficient: "I think the Unites States needs to reorganise its fiscal policy in the long-term and not always try to alter its debt limit every couple of months to ensure the central state is still able to act."

U.S. Treasury Secretary Jack Lew said on Wednesday the United States would exhaust its borrowing capacity no later than October 17, at which point it would have only about $30 billion in cash on hand. That estimate puts extra pressure on lawmakers to raise the $16.7 trillion debt limit.

(Reporting By Michelle Martin and Reinhard Becker; Editing by Toby Chopra)

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