PARIS - LAST week's radical US interest rate cut was not linked to the rogue trader losses at Societe Generale and such an idea is nonsense, French central bank governor Christian Noyer said on Monday.

'This had nothing to do with the monetary policy of the (US Federal Reserve),' Noyer told BFM Radio.

On Tuesday, the Fed slashed interest rates three-quarters of a percentage point to 3.50 per cent to help steady plunging financial markets that had been spooked by fears the US would fall into recession and take the world with it.

On Thursday, allegations that a rogue trader at Societe Generale had lost the bank more than US$7 billion (S$10 billion) in unauthorised trades sparked speculation that the Fed had in effect been bounced into the rate cut.

Financial markets were in turmoil last Monday through to Wednesday, chalking up massive losses which some commentators suggested were in part due to Societe Generale selling off the losing positions taken out by the trader.

The Fed's rate cut decision 'was made soley in view of its judgement about the economic situation in the United States, which has nothing to do with the European financial markets,' Mr Noyer said.

'The Fed does not take exceptional decisions on monetary policy on the basis of what is happening in the European markets,' he insisted.

'It is nonsense, it just does not hold water!' The governor also said that Societe Generale's decision to unwind the positions taken by the trader as quickly as possible 'was probably the only course open to them to ensure ... the bank did not face any dramatic risk for longer than necessary.'

The bank's decision did aggravate the losses because it was in a forced sale but Mr Noyer said that the trader's positions, totalling 50 billion euros (S$105 billion), were dramatic.

'Nobody knew what was going to happy on the markets,' he added.

Mr Noyer said the decision was taken by Societe Generale chairman Daniel Bouton on his own authority and he had then informed the regulators.

'It was his decision,' the governor said, adding that it was 'not contrary to any legislative or regulatory rules whatsoever.'

Turning to the impact of the US 'subprime' crisis on the European economy - which cost Societe Generale two billion euros - Mr Noyer said it will undoubtedly cause a slowdown but that does not mean there will be a major problem.

'Of course (the European economy) is going to slow down,' he told the radio station.

'But nothing enables us to say that we are heading for a big slowdown. I have not seen many indices showing a sharp slowdown,' he said.

'The economy will go slightly less quickly than we had hoped. Will it be a lot slower: we don't know.' -- AFP