RTRS:Euro interbank rates dip as ECB rate cut remains in view
FRANKFURT/LONDON, Nov 12 (Reuters) - Key Euribor
bank-to-bank lending rates dipped on Monday after analysts saw
an increased chance of the European Central Bank cutting policy
rates in the months ahead.
Bank-to-bank lending rates have fallen sharply since last
November when ECB plans to flood the banking system with
ultra-cheap, 3-year cash emerged. The ECB has also cut interest
rates to a record low of 0.75 percent.
The ECB left interest rates on hold on Thursday, and its
president, Mario Draghi, declined to comment when asked whether
markets were right to expect a cut next month. A
majority of analysts in a Reuters poll expected the ECB to
reduce rates in the coming months.
Three-month Euribor rates, traditionally the
main gauge of unsecured bank-to-bank lending, eased to 0.192
percent on Monday from 0.193 percent but the equivalent Libor
rate, fixed by a smaller panel of banks in London,
was unchanged for the third day at 0.12857 percent.
Longer-dated six-month Euribor rates fell to 0.363 percent
from 0.366 percent, while the one-week rate ticked
down to 0.078 percent from 0.079 percent. The overnight Eonia
rate eased to 0.072 percent from 0.087 percent.
Dollar-priced bank-to-bank Euribor lending rates
increased, with three-month rates
rising to 0.58769 percent from 0.58462 percent and one-week
rates up to 0.36077 percent from 0.35615 percent.
The ECB's decision in July to stop paying interest on
overnight deposits paved the way for further declines in
euro-denominated rates by removing the 0.25 percent floor for
the money market.
The amount of excess cash in the euro zone banking system is
extremely high at about 676 billion euros, according to Reuters
calculations.
With that figure set to remain high for the foreseeable
future, money market experts have focused on whether the ECB
could copy Denmark's example and start charging banks to deposit
cash overnight.
Policymakers showed initial interest in the idea but some
have since expressed reservations. Governing Council member
Ewald Nowotny said last month a negative deposit rate was not
realistic.
Asked about the idea on Thursday, Draghi said: "We haven't
discussed (that)."
