Asmussen says ECB watching market rates closely -CNBC

(Corrects to say "than of" not "and of" in paragraph 6)

FRANKFURT, Oct 9 (Reuters) - The European Central Bank is keeping a close eye on the development of market interest rates and can step in if necessary, Executive Board member Joerg Asmussen said.

"We are looking at money market rates, especially EONIA, very closely," Asmussen said in an interview with CNBC that was aired on Wednesday.

"We will keep this in mind and if necessary we can deal with a number of instruments with the liquidity situation for the banks," he said, adding that liquidity was "no substitute for lack in capital".

Asmussen also said it was too early for the ECB to think about exiting its loose monetary policy stance.

"We are in a different situation of the business cycle than the U.S. is. So for us it is clearly too early to exit," he said.

"But when the point comes one has to be clear communication-wise and I'm also very much convinced that exiting is possible. For me it is more a question of political will than of technical possibilities," he said.

Asked whether he saw a real risk of the United States defaulting, he said: "To be honest I don't see this. We have learned from our U.S. friends how to be pragmatic and I'm convinced that they will find a solution before the critical moment arises." (Reporting by Eva Taylor; editing by Mike Collett-White)