By Francesco Canepa and Balazs Koranyi FRANKFURT (Reuters) - European Central Bank policymakers want to soon start discussing how to tackle the ...
By Francesco Canepa and Balazs Koranyi FRANKFURT - European Central Bank policymakers want to soon start discussing how to tackle the multi-trillion-euro pool of excess liquidity sloshingSaltWire's Atlantic regional weather forecast for September 18, 2023 | SaltWireFRANKFURT - European Central Bank policymakers want to soon start discussing how to tackle the multi-trillion-euro pool of excess liquidity sloshing around banks, with raising reserve requirements a possible first move, six...
With rates likely on hold at least until December, policymakers are now starting to shift their focus to the cash that they injected into the banking system over a decade of bond purchases. The sources said this would have the dual benefit of mopping up cash from the banking system and reducing how much the ECB and the euro zone's 20 national central banks pay out in interest on deposits, which has led to large losses for some.
The debate about shrinking the 4.8 trillion euro pile of debt hoovered up under different schemes by the ECB since 2015, mostly to avert the risk of deflation, was seen by the sources as more difficult. Slovenian central bank governor Bostjan Vasle recently backed selling bonds bought under the ECB's older Asset Purchase Programme, which is less flexible than the PEPP. But one of the sources pointed out that this would result in even bigger losses for the ECB as those bonds were mostly bought at higher prices.
Finally the sources said they had not even really started debating the policy framework - whether the ECB wants to continue setting a floor for the interbank rate or go back to a corridor-system in which it provides a lower and upper limit.
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