Key Euribor rate unchanged, message on interest rates mixed

FRANKFURT (Reuters) - The key Euribor bank-to-bank lending rate held steady on Monday as European Central Bank policymakers offered mixed views on the prospect of further interest rate cuts.

The euro zone economy emerged from recession in the second quarter and a survey last week showed business activity across the euro zone picked up this month at a faster pace than expected.

ECB policymaker Ewald Nowotny said last week he saw no reason at the moment to cut rates. His colleague, Bundesbank President Jens Weidmann, told Germany's Handelsblatt that he saw no change in the ECB's current monetary policy stance.

But Cypriot central bank governor Panicos Demetriades told Bloomberg that a rate cut was still "on the cards", but added that the most recent data was "more encouraging".

The ECB holds its next policy meeting on September 5.

On Monday, the three-month Euribor rate, traditionally the main gauge of unsecured bank-to-bank lending, remained unchanged at 0.225 percent.

The six-month Euribor rate rose to 0.345 percent from 0.344 percent and the one-week rate increased to 0.106 percent from 0.105 percent. The overnight Eonia rate edged down to 0.077 percent from 0.079 percent.

Dollar-priced bank-to-bank Euribor lending rates were mixed, with three-month rates staying at 0.50667 percent and one-week rates rising to 0.30833 percent from 0.30667 percent.

Excess liquidity in the euro zone banking sector stood at 238 billion euros, still high enough to keep short-term market rates below the ECB's refinancing rate.

The ECB said in its July monthly bulletin that as long as excess liquidity "remains above a certain threshold, estimated to be in the range of 100 billion to 200 billion euros, short-term money market rates are expected to stay slightly above the deposit rate".

A Reuters poll of traders showed last week they did not expect euro zone money market rates to rise significantly even if excess liquidity drops below the 200 billion euro level.

The ECB's main refi rate is at 0.5 percent and the deposit rate at zero.

(Reporting by Frankfurt newsroom; Editing by Catherine Evans)