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.
Orphanides said inflation expectations over the ECB’s policy horizon were on the low side and the ECB’s current “very accommodative” stance with record low interest rates and generous liquidity was appropriate.
At the same time, central banks urged financial institutions to be reasonable in bidding for funds at the ECB’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.
Orphanides said the gradual phasing out of measures which were no longer needed by banks was not equivalent to a tightening in monetary policy.