ECB wants banks to get set for a slow, steady exit

THE European Central Bank will not drop all of its extra liquidity support until it becomes concerned about risks on inflation, governing council member Athanasios Orphanides said yesterday.<br /><br />Orphanides said inflation expectations over the ECB&rsquo;s policy horizon were on the low side and the ECB&rsquo;s current &ldquo;very accommodative&rdquo; stance with record low interest rates and generous liquidity was appropriate.<br /><br />At the same time, central banks urged financial institutions to be reasonable in bidding for funds at the ECB&rsquo;s next 12-month lending operation in December, which will probably be its last given ECB president Jean-Claude Trichet has already signalled these are unlikely to be renewed next year. <br /><br />Orphanides said the gradual phasing out of measures which were no longer needed by banks was not equivalent to a tightening in monetary policy.