(Adds quotes on asset purchases, details)
FRANKFURT, March 5 (Reuters) - The European Central Bank still has scope to cut interest rates, Governing Council member and head of the German Bundesbank, Axel Weber, said on Thursday after the ECB cut euro zone rates to a new record low.
"We have now used room to go down. We have not exhausted that," Weber told German TV station ARD.
The ECB cut rates to an all-time low of 1.5 percent on Thursday as expected. The bank's President Jean-Claude Trichet signalled that further cuts were possible but dodged questions on when or how low the bank could go.
The ECB also published new economic forecasts showing a deep and lengthy recession for the 16-country bloc. The bank's staff predicted the euro zone could shrink by as much as 3.2 percent this year, more than three-times worse than it's previous worst case scenario. (For story please click)
Weber added that interest rates needed to be pushed back up as soon as the economic situation improves.
"They should go up again, when the economy shows signs of picking up... naturally are considering that when we see an improvement, then we have to go back up relatively fast," he said.
When asked whether the ECB should buy government bonds, Weber said this should only be an option if deflation rears its head.
"At the moment we are still in a situation where we ... improve the credit conditions by providing liquidity to banks, that is our focus now," he said. "Other actions would only come into question when we have a marked deflation risk."
Trichet said earlier on Thursday the central bank was studying all options and had not excluded anything as far as non-traditional means are concerned. (Reporting by Sakari Suoninen; Editing by Ron Askew/Victoria Main)