ECB soaks up billions more from eurozone markets
03 January, 2008
FRANKFURT (AFP)-The European Central Bank said Wednesday it drained a further 168.64 billion euros (247.61 billion dollars) from eurozone money markets with a new offer aimed at mopping up excess liquidity.
The tender had a fixed rate of 4.0 percent, the same level as the ECB's benchmark lending rate. Fifty-four banks participated in the operation for one-day funds.
"The ECB stands ready to steer liquidity towards more balanced conditions if this is needed to align short-term interest rates with the minimum bid rate," it said in a statement.
The ECB had intended to take up to 200 billion euros out of the money market but the banks' offers fell short of that amount.
The ECB has recently been providing liquidity for periods of two weeks or longer while soaking up excess cash in the shorter term to ensure that interbank lending markets are amply supplied but in a way that does not fuel inflation.
On December 31, it drained 101.58 billion euros and on December 27 and 28, it pulled 145.6 billion euros and 150 billion euros.
The operations have been aimed at absorbing liquidity that had built up in the market since the start of a crisis in August in the US subprime -- or high-risk -- mortgage sector.
The subprime meltdown, which has seen a wave of foreclosures, left major banks that held shaky mortgage-backed securities reluctant to lend money, raising the spectre of a global credit crunch.
That stance in turn prompted central banks in Europe and elsewhere to inject huge sums of money into the market in an effort to restore credit flow again.
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