- Peter Schaffrik, head of European rates strategy at RBC Capital Markets
Another pledge of support and readiness to act was claimed by the ECB President Mario Draghi, who said European authorities are ready to deploy another long-term refinancing operation in order to provide funds to the region's banking system if needed. This action may be also required to push money-market interest rates from rising to levels, which could dampen the inflation. During his speech at the European Parliament, Draghi stressed out current credit volumes are not shoring the effect of improvement in banking funding conditions, giving some support to the view interest rate will stay at record-low for some time. Earlier, the ECB has funnelled more than a trillion euros to banks through its three-year liquidity operations, and so far early repayment of those loans has cut the excess liquidity to almost 225 billion euros. This level is only 25 billion above the ECB target, when, according to ECB's projections, market rates will start edging higher toward the main refinancing rate of 0.5%.
A separate report from the Ifo Institute for Economic Research posted unexpected figures reflecting German business mood. Hence, a gauge of sentiment among German companies advanced to 107.7 in September, from a reading of 107.5 in the prior month; however, short of analysts' expectations of a 108.0 figure. The Current Assessment Index also showed weakness, falling to 111.4 following the 112.0 reading in August.
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