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European Central Bank begins withdrawing stimuli liquidity

Saturday, December 5th 2009 - 02:33 UTC
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ECB president Jean Claude Trichet expects banks “do their job” ECB president Jean Claude Trichet expects banks “do their job”

The European Central Bank (ECB) is to start withdrawing some of its special measures to support the economy. The bank is withdrawing some of its cheap short-term loans designed to boost the amount of money available in the markets and encourage bank lending.

ECB president Jean-Claude Trichet said he had asked the banks “to do their job. We have helped them considerably.”

The comments came as the Bank left interest rates on hold at 1% - the lowest level in its 10-year history.

ING senior economist Carsten Brzeski said: “The gentle exit has begun. Today's message to banks was crystal clear: do your homework, free refills are coming to an end.”

Specifically, Mr Trichet said the 12 month loan offering in December would be the last one and the six month offering will end in March.

Mr Trichet said: “The improved conditions in financial markets have indicated that not all our liquidity measures are needed to the same extent as in the past.”

He also said that the current interest rate was “appropriate”.

The forecast for growth in the Euro-zone in 2010 was also raised to between 0.1% and 1.5%, up from a previous prediction of between -0.5% and 0.9%.

But Trichet warned that the recovery process would be “uneven and subject to risks”.

Separately, the European Union's Eurostat agency confirmed that the Euro-zone economy grew by 0.4% in the third quarter of 2009.

Categories: Economy, Politics, International.

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