MNI: ECB To Trim MRO/DFR Corridor To 15bp From Sep 18
Central bank announces new framework with narrowed channel on rates.
The ECB will reduce the spread between its Main Refinancing Operations and Deposit Facility Rate to 15bp from its present 50bp on September 18.
In a statement to announce the new operational framework, the ECB Governing Council said this would create room for money market activity and “provide incentives" for banks to seek "market-based funding solutions'”.
The ECB will continue to steer monetary policy via the DFR and MROs will continue to be central in meeting liquidity needs, continuing as fixed-rate and full allotment, as will 3-month LTROs. Short-term rates will evolve in the vicinity of the DFR, with tolerance for some volatility as long as this does not “blur the signal” on monetary policy.
The ECB will review its new framework in 2026 or earlier if necessary. The ECB also envisages structural long-term refinancing operations and structural portfolio securities for operational purposes “at a later stage”. Minimum Reserve Remuneration remains unchanged at 0%. (see MNI SOURCES: New ECB Framework To Maintain Continuity)