The European Central Bank should cut interest rates only gradually and not lower them to a level that stimulates growth since that would not resolve the economy's deep structural faults, ECB board member Isabel Schnabel told Bloomberg.

The European Central Bank needs to be wary of cutting interest rates too far as borrowing costs are already near a level that no longer restrains the economy and going lower could backfire, according to Executive Board member Isabel Schnabel.

Officials can continue to loosen monetary policy, but should do so only gradually to avoid taking rates below the so-called neutral threshold, Schnabel said in an interview. Easing too much could squander valuable policy space, she said.

With the deposit rate standing at 3.25% following the three quarter-point cuts so far this year, Ms Schnabel said “we may not be so far” from it now. The remarks feed an intensifying debate about how the ECB should react to a deterioration in the eurozone economy alongside inflation that is approaching 2% more rapidly than previously foreseen.

The eurozone isn’t at imminent risk of recession despite a softening labor market and signs of contraction in business activity, the European Central Bank’s Isabel Schnabel said in an interview Wednesday.

The European Central Bank should ease policy only gradually, and cutting rates to a level that starts to stimulate growth may not be appropriate, ECB board member Isabel Schnabel told Bloomberg in an interview published on Wednesday.