The European Central Bank announced Friday it would continue to supply markets with sufficient liquidity until the end of the year to keep short term interest rates the closest possible to the reference rate.
In a release the ECB admits the resurgence of some tensions in the Euro money market in connection with the upcoming end of the year, but underlined that it would continue with its policy of allotting more than the benchmark allotment in main refinancing operations as long as needed at least until after the end of the year. "Moreover, on 8 November 2007 the Governing Council decided to renew the two supplementary longer-term refinancing operations which both cover the end of the year". As an additional measure, the ECB Governing Council decided Friday to lengthen the maturity of the main refinancing operation settling on 19 December 2007 to two weeks. The new maturity date will be on 4 January 2008 instead of 28 December 2007. "In this operation, the ECB will aim to satisfy the banking sector's liquidity needs for the entire two-week period, covering both the Christmas holidays and the end of the year. The allotment amount in this operation will be decided in full consistency with the aim of keeping interest rates close to the minimum bid rate". The main refinancing operation settling on 28 December 2007 will allow potential further liquidity demands to be satisfied. "The ECB continues to monitor liquidity conditions in order to keep very short term rates close to the minimum bid rate. In this regard it continues to aim at balanced liquidity conditions at the end of the maintenance period. If needed, the ECB also stands ready to steer liquidity towards more balanced conditions earlier in the maintenance".