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Corridor To Be Tighter Than Expected, Review Light On Details Re: Structural Bond Holdings

ECB

The ECB announces the changes to the operational framework for implementing monetary policy following its non-monetary policy meeting.

  • The refinancing/deposit rate corridor will move to 15bp in September vs. 25bp generally expected and 50bp at present.
  • That points to easier funding conditions for banks vs. baseline expectations. STIRs were already very relaxed on that front and Euribor futures haven't had a meaningful reaction (generally ticking off session lows). Euribor/ESTR futures spreads are unchanged. European bank stocks rally.
  • The Bank confirmed that “a broad collateral framework will be maintained for refinancing operations.”
  • The Bank also confirmed that “the reserve ratio for determining banks’ minimum reserve requirements remains unchanged at 1%. The remuneration of minimum reserves remains unchanged at 0%.” This met wider expectations
  • There was little clarity re: ECB structural bond holdings, with that facility and “new structural longer-term refinancing operations” to be introduced at a later stage. We suggested that there would be little in the way of details re: structural bond holdings ahead of the meeting. Moving forwards “an in-depth analysis of the design of the new longer-term refinancing operations and the new structural portfolio will also be conducted."
  • The Bank also noted that a review of the key framework parameters is foreseen “in 2026, based on experience gained in the intervening period, or earlier if necessary.”
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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