Low take-up of ECB Loans

The ECB’s ‘Targeted Longer-Term Refinancing Operations’, allows banks to borrow at low fixed rates if they agree to terms for lending to businesses and households in the region. The Bank has injected €129.8bn through its second of eight offers of cheap four-year loans, missing expectations of a higher take-up.

The result of the auction will weigh on the ECB’s decision-making in the months ahead, with weak demand supporting the case for doing more. The remaining six auctions will take place over the next two years

At this month’s policy meeting, most governing council members toughened up their language on plans to bloat the ECB’s balance sheet by €1tn to stave off the threat of stagnation and a damaging fall in inflation expectations.

The change in language has boosted expectations of a broad package of asset purchases, including sovereign bonds, which could come as soon as the next monetary policy meeting in January 2015.