The ECB will announce the next step in its plan to phase out unconventional policy support this month. This might well be to increase the interest rate on its three-month loans to commercial banks. But its earlier generous provision of long-term loans will mean that there is a very generous supply of liquidity in the banking sector for a long time yet. And with the Bank’s new forecasts likely to suggest that the economic outlook is pretty gloomy, any tightening of conventional monetary policy seems a long way off.
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