FRANKFURT (MNI) – The recent rise in money market rates should be
considered mild given the significant amount of liquidity drained from
the system, European Central Bank Executive Board member Juergen Stark
said on Friday.
“We have seen a slight increase in the EONIA rate, in the overnight
rate, but taking into account that we absorbed E250 billion of
liquidity, this is a very mild reaction in the markets,” Stark said
during the “ECB And Its Watchers Conference.”
“We should not exaggerate” the recent increase in interbank
borrowing cost, Stark asserted.
While there had been a concern “over the functioning of the money
market, over the transmission mechanism,” more recently we “have seen a
re-activation of money markets and this is a very positive sign,” the
ECB’s chief economist said.
He also observed that fears of a negative impact of the recent
tensions on the money market, on confidence and on economic activity had
not materialized.
“In the second half, it is very likely that we will see a
deceleration [of growth],” Stark conceded. However, “we are confident
that we will continue the recovery,” he added.
Stark said bank stress tests are “a very serious exercise and it
has to be taken seriously.”
“Governments have agreed with the consent of the banks that results
will be published and do not expect major problems to come from these
stress tests. But we have to wait for the results,” Stark said.
–Frankfurt newsroom +49 69 72 01 42; Email: frankfurt@marketnews.com
[TOPICS: MT$$$$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]
