Via MNI – the monthly report from the Bundesbank on Monday said
- that its is open to halting the weekly sterilization of bonds bought under the European Central Bank’s SMP programme
- The Bundesbank’s on-the-record support for pausing SMP sterilization will likely stoke speculation the Bank may revert to this tool to boost liquidity levels
- A full halt of sterilization could add around E175.5 billion to excess liquidity
While describing the recent reduction in excess liquidity as a positive sign, the Bundesbank said that under current conditions “liquidity absorbing operations of the Eurosystem contribute to money market volatility.”
“Overall, the Bundesbank is therefore open to a possible adjustment of current liquidity absorbing operations, should this be suitable to help stabilize money market and liquidity conditions and thereby signal more clearly than now the accommodative monetary policy stance of the Eurosystem”
The Bundesbank reports essentially confirms previous media speculation that it would support at least a temporary end to sterilization, which may make it easier for the ECB to to announce a change in its policy.
More here: BBK: Generally Open To Adjustments On SMP Bond Sterilization
