Whoooooosh.
Is that the sound of the ECB draining €295bn worth of liquidity from the eurozone system?
Some people certainly thought so.
This for instance is from GCI Financial on Wednesday:
The ECB withdrew a huge €295 billion today in a one-time fine-tuning operation. This is the latest indication that ECB officials are becoming concerned with excess liquidity in the Eurozone’s system. The ECB is expected to keep interest rates unchanged for the foreseeable future.
ECB really worried about excess liquidity? Err, probably not. Not based on this €295bn-op anyway.
Some reports have already pointed out that the €295bn is part of the ECB’s `normal’ draining operations — things that are generally targeted at short-term imbalances. As Reuters puts it:
Tuesday is the last day of the ECB’s latest reserve maintenance period when the ECB regularly drains cash from the euro zone banking system when there is excess liquidity.
A quick glance at the central bank’s open market operations history shows these types of transactions happening about once a month. In graphic form, the operations look like this:
So that would be some steady growth in the amount being drained recent months, but nothing to suggest the ECB is about to whip out a ginormous liquidity-squeegee.
Related links:
ECB pushes on with withdrawal of emergency aid – FT
Just baby steps on liquidity withdrawal – Reuters
So farewell, 12-month LTRO – FT Alphaville
The ECB as liquidity monster – FT Alphaville