MEXICO CITY, Oct 27 (Reuters) - If euro zone inflation rises back to target more slowly than previous expected, the European Central Bank may need to cut its deposit rate further, although this is still an open discussion, a top European rate setter said on Tuesday.
Real interest rates matter more for the economy than nominal rates and falling inflation expectations push up real rates, ECB Executive Board member Benoit Coeure said in Mexico City.
“If we see a risk that inflation would go back to 2 percent... in a much more sluggish way than would be previously expected... that may also mean an adjustment of the deposit facility rate,” Coeure said. “It’s an open discussion.”
The ECB earlier said that its -0.2 percent deposit rate has hit bottom but last week raised the prospect of further cuts and markets are already pricing in a reduction to -0.3 percent when the Governing Council meets in early December. (Reporting by Anna Yukhananov; Writing by Balazs Koranyi; Editing by Lisa Shumaker)