FRANKFURT - THE European Central Bank 'obviously' has room to cut interest rates further because inflation is easing, governing council member Ewald Nowotny said on Thursday in a newspaper interview.

But future ECB rate cuts might not be as sharp as the last two, a half percentage point each, Mr Nowotny told the Financial Times.

The central bank cut its main lending rate by 50 basis points in a joint move with other central banks on October 8 and then reduced it by another 50 points on November 6 to its current level of 3.25 per cent.

But many analysts felt the ECB was too timid, in contrast with the Bank of England, which slashed its main rate by a record 1.5 percentage points on November 6 after joining the coordinated cut on October 8.

'Nobody, I really think, knows how deep this recession will go ... so therefore it makes perfect sense not to use all your firepower at once,' Mr Nowotny was quoted as saying.

The governor of the Austrian central bank also said the European Union should offer to help eastern European countries cope with the international financial crisis and subsequent economic slump.

Governments in those countries, meanwhile, should devise spending packages to bolster their economies because a fall in bank lending would hobble economic activity, he said.

'I think that also the countries themselves should think about creating some expansionary measures of their own,' Mr Nowotny said. -- AFP