The European Central Bank (ECB) kept its main refinancing rate unchanged at 1%, but announced that it will phase out its six-month and one-year refinancing facilities and move to an index-based interest rate rather than a fixed or auction based rate for future refinancing operations.
The first move, the phasing out of the long-term refinancing facilities (the last one-year operation takes place this month; the last six-month operation in March) is a very healthy step in normalizing central bank policy. It’s also a rather hawkish step as it forces financial institutions to re-finance…
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