European Central Bank President Jean-Claude Trichet yesterday signalled the bank's likely next move, saying it could cut its headline interest rate but only by an additional 25 basis points.
Mr Trichet is currently on a trip to Japan. In an interview with Kyodo news agency he said any additional cut would be a very measured one.
In an interview with Yomiuri newspaper, Mr Trichet said: "I said I did not exclude that we could decrease rates by a very measured pace.
"I said: today we had decreased rates by 25 basis points. It's a measured pace. Therefore it is the scale of a possible future move."
Kyodo also quoted Mr Trichet as repeating the view that slashing rates to zero was not at all appropriate in the euro zone.
He also reiterated that the bank would not lower its overnight deposit rate - the rate steering all-important money market rates - from its current level of 0.25 per cent.
The ECB's benchmark interest rate now stands at an all-time low of 1.25 per cent. It has lowered it by 3 percentage points since October and analysts expect it to make one final 25 basis points cut to 1 per cent in May.
Even though the euro area is struggling with the worst recession since the creation of the single currency, the ECB has repeatedly ruled out cutting rates to zero.
A number of top ECB policymakers have said they are equally reluctant to take them below 1 per cent as it would risk paralysing money markets and send the wrong signal.
The ECB's main rate remains higher than its peers. The US Federal Reserve's target policy rate is between zero and 0.25 per cent. The Bank of Japan's is 0.1 per cent and the Bank of England's 0.5 per cent.
However ECB members point out that the bank's tactic of flooding money markets with extra funding have helped push all-important interbank rates down to levels parallel with elsewhere.
In another interview with Jiji Press, Mr Trichet touched on the troubles being experienced by some eastern and central European countries, urging banks that have lent in the region to keep lending.
¿The message that we are giving to the banks in the euro area is that they have responsibilities in those countries where they have subsidiaries or interest, and we recommend them to continue to be as responsible as possible,¿ he said, according to an English language transcript seen by Reuters.
Reuters