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By Leika Kihara and Marcin Grajewski
TOKYO/BRUSSELS, Jan 16 (Reuters) - European Central Bank President Jean-Claude Trichet on Friday reiterated there was still room for further interest rate cuts but said the bank was not thinking about adopting a zero rate policy.
His comments came as Europe's top business group BusinessEurope warned that companies were being choked by a lack of financing and urged the central bank to do more to revive the region's paralysed economy.
The ECB cut rates by another half a percentage point to 2.0 percent on Thursday, its fourth cut in as many months and taking credit costs to the lowest in the euro zone's 10-year history.
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In an interview with Japanese television, Trichet made it clear that rates could drop further but stressed the bank wanted to avoid cutting rates all the way to zero.
"To the question 'is 2 percent the lowest level that you will attain', I say no... If you ask me the question 'if you go to zero', I would say no," he told public broadcaster NHK.
BusinessEurope, which represents 20 million European companies, said the ECB needed to keep cutting rates and do more to restore the flow of financing to companies, perhaps by buying debt from companies to spare up cash and help fire the economy.
"We are in a very deep and unexpected crisis... In 2009 we are going to have really tough times," BusinessEurope President Ernest-Antoine told a news conference with the group's chief economist, Marc Stocker, saying that companies had seen "complete economic paralysis," since September.
In a speech in Madrid, ECB Executive Board member Jose Manuel Gonzalez-Paramo said money market tensions were still hampering the flow of funds around the world.
"Other important segments of the global financial system, such as the markets for equities, bonds and commodities, have also entered a period of considerable turbulence and stress," he said.
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A Reuters poll showed that economists are near unanimous in expecting more cuts from the ECB. In total 61 out of the 64 forecast another 50 basis points in March after Trichet all but ruled out a cut in February.
"Our decision-making February meeting is only in three weeks, we do not consider that it would be an important rendezvous for policy making," Trichet said at the ECB's post rate decision news conference on Thursday.
"We will see in March what we will do. We will have substantial elements of new information."
Rates are now expected to bottom later this year at 1 percent, according to the poll of analysts.
That is still higher that the current rates of central banks in the United States, Japan and Switzerland which have all cut their policy rates close to zero, while the Bank of England is also seen heading that way.
"We would be very, very keen to avoid to be put in a situation which for us would not be appropriate, namely a liquidity trap." Trichet said, defining that as the point when rates were "very, very low".
"Near-term, the ECB's Governing Council seems poised to pause at the upcoming rate setting meeting. Part of the reasoning is that the ECB aims to avoid being trapped by nominal interest rates," said Dresdner Kleinwort analyst Rainer Guntermann.
"(That) does certainly not imply an end to the ECB's easing cycle...Whether the next move will be 50 basis points again or a smaller 25 basis points will ultimately be determined by the upcoming data, even though some individual comments from ECB Council members could produce some noise," he said.
Gonzalez-Paramo added that the ECB must also keep up its other efforts to help repair the financial system.
"As long as money markets remain dysfunctional, it is crucial for the Eurosystem to continue to provide as much liquidity as needed in order to ease tensions," he said.
(Additional reporting by Krista Hughes in Frankfurt, writing by Marc Jones; Editing by Andy Bruce)