(adds Stark quotes, BoE measures)
By Antonia van de Velde and Paul Day
BRUSSELS/MADRID, Feb 11 (Reuters) - European Central Bank policymakers pressed home on Wednesday the message that the bank is likely to resume cutting interest rates next month to fight the euro zone's deepening recession.
"We can clearly keep cutting," Governing Council member Miguel Angel Fernandez Ordonez told reporters. "It is very likely in the next meeting we cut. The market says 50 basis points, but we will talk in the next meeting."
Ordonez, who heads the Bank of Spain, painted a gloomy picture for the economy, branding the current crisis the worst since the Great Depression of the 1930s. (For story please double click on)
His Belgian colleague Guy Quaden was almost as direct, saying he was ready to lower rates whenever necessary.
"We will await the next meeting in March, but I have no objections -- and I think this is the case for a great number of my colleagues -- to lowering the rate if it is justified," he told a news conference.
The ECB kept rates at 2.0 percent at its February policy meeting last Thursday, following an aggressive series of cuts since October. But President Jean-Claude Trichet signalled a cut would come at the March 5 policy meeting, bolstering expectations of another 50 basis point reduction. (For details of Reuters poll please double click on)
Trichet said the ECB did not want to reduce rates as far as zero as the U.S. Federal Reserve has done with a target of 0-0.25 percent, but analysts have begun to question how long the ECB can hold off.
"I am not in a hurry to go towards a zero rate or close to zero, but given the prospects of significant deteriorating activity and lower inflation ... I am absolutely ready to go below two (percent)," Quaden said.
ECB Executive Board member Jose Manuel Gonzalez-Paramo sent a similar message. "A rate of 2 percent is not the lowest rate we can think of, taking into account the situation right now," he told Intereconomia radio in Spain.
"Inflation expectations continue (to be) anchored and growth slowdown is intense," he said, adding that the ECB would also continue to bolster the financial system with extra liquidity. (for full story please click)
DEFLATION?
Inflation, which the ECB aims to keep just under 2 percent, slowed to 1.1 percent in January, the lowest rate since 1999 and down from a 16-year high of 4.0 percent back in July.
Policymakers have backed the view of analysts that prices are likely to start dropping around the middle of the year as the recession takes its toll. But most have rebuffed concerns about possible deflation, a sustained spell of falling prices.
"I don't see deflation." Juergen Stark, another Executive Board member, said in a speech in Stuttgart. However, he added: "The downwards inflation trend will continue for some months ... negative inflation rates are possible."
Echoing his colleagues, Stark said the ECB still had room to reduce rates. But he also underlined the ECB's ongoing reluctance to cut rates to zero. "We at the ECB do not see zero rates as desirable in our monetary policy," he said.
Outside the euro zone, Sweden's Riksbank became the latest central bank to cut its key interest rate, chopping it by a full percentage point to a record low of 1.0 on Wednesday.
Riksbank chief Stefan Ingves said the bank could not rule out taking rates to zero, as the economic situation was looking worse than originally forecast..
In Britain, as the heads of banking giants RBS, Barclays and HBOS were being grilled by politicians over the financial crisis, the Bank of England sketched out some of the ways it hopes will undo the damage.
The BoE's Governor Mervyn King said the bank could start buying gilts as soon as next month, as part of a planned campaign to boost the UK economy other than cutting interest rates. The March gilt future recorded its biggest daily gain on record.
PROTECTION FROM PROTECTIONISM
ECB policymakers also continued to warn about protectionist moves from governments. Quaden said the ECB did not contest the usefulness of national stimulus plans, but cautioned against a return to protectionism.
"We must learn our lessons from history. In the 30s, it (the crisis) went on for too long because the measures were excessively orthodox from a monetary and budgetary point of view and also because they were protectionist measures," Quaden said.
Policymakers in Europe and elsewhere have expressed concern that the United States is moving towards increased protectionism, while French car industry plans have created uproar.
Measures should be coordinated at a euro zone level and the the big, cross-border financial players needed a European supervisory system, Quaden said.
EU Economic and Monetary Affairs Commissioner Joaquin Almunia told the European Parliament, "We have been analysing with some concern some signals of protectionism... Protectionism is the worst response to this problem (economic crisis)."