* Non-standard exit should not be confused with rate signal
* Too early for exit path
* Delayed exit would bring more rate hikes later
* Emerging Asia should exit first
(adds details)
FRANKFURT, Nov 20 (Reuters) - Financial markets should not assume that by removing some of its crisis measures, the European Central Bank is preparing to raise interest rates, Executive Board member Lorenzo Bini Smaghi said on Friday.
"Given that the exit will be gradual and will involve two dimensions, i.e. the non-standard measures implemented by central banks and the level of interest rate, there is a risk that market participants might interpret a decision about one part of the exit as paving the way for the rest," Bini Smaghi said in a speech given in Paris and published on the ECB's Web site.
Fear of overreaction by markets might drive central banks to delay needed decisions, he said, and added good communication by central banks to prepare markets was essential.
The ECB has cut its main refi rate by 325 basis points to 1.0 percent since the intensification of the financial crisis.
Bini Smaghi also said it was still too early to lay down an exit path, as there are a lot of uncertainties about the economy, and no precommitment to a sequence of withdrawing stimulus measures could be made yet.
He also said emerging Asian economies would logically be the first to exit, because economic growth is returning there first, followed by Latin America. North America and other advanced economies would come last.
But a delayed exit in Asia would add to problems in the long run.
"An untimely exit by the countries that are ahead in the cyclical upturn creates distortions and encourages other countries to delay their exit, thus further adding to the imbalances and making the exit more difficult for everybody," he said.
Bini Smaghi added removing crisis support measures too late would result in faster rate hikes when they are started.
"The more the exit is delayed, the greater the adjustment will have to be when interest rates are ultimately increased, in order to catch up."
As those exiting first need to be confident others will follow, stronger international cooperation is needed to avoid delayed exits, which would make the situation more difficult for everyone in the longer run.
"A delayed exit postpones the pain but in the end the pain is greater," Bini Smaghi said. "Late exits seem to be the rule, and possibly also the cause of the crises that follow."
(To read speech please click http://www.ecb.int/press/key/date/2009/html/sp091120_1.en.html) (Reporting by Marc Jones and Krista Hughes)