Key Euribor rate rises as ECB's Coeure plays down QE possibility

Reuters

FRANKFURT (Reuters) - The key euro-priced bank-to-bank lending rate edged up on Friday as a top European Central Bank policymaker played down any prospect of the bank embarking on a major asset-purchasing programme.

A fall in the amount of excess liquidity in the system also supported the lending rates. The three-month Euribor rate, traditionally the main gauge of unsecured bank-to-bank lending, rose to 0.234 percent from 0.233 percent.

Earlier, ECB Executive Board member Benoit Coeure said the ECB does not need to make large-scale asset purchases like the U.S. Federal Reserve given the euro zone's inflation outlook.

Some other ECB policymakers had earlier this month floated the idea of the central bank embarking on asset purchases, or quantitative easing (QE).

On Wednesday, ECB Vice-President Vitor Constancio dampened speculation about two other non-standard policy options the central bank could deploy to support the weak euro zone economy, where inflation is running below the ECB's target.

Constancio said the central bank would only cut its deposit rate into negative territory in an extreme situation, and dampened speculation the ECB was actively preparing to inject more funds into the financial system.

Excess liquidity, the amount of money in the market beyond what banks need for their day-to-day operations, is starting to put upward pressure on market rates.

It fell to 159 billion euros on Friday, close to its lowest level since September 2011.

Short-term money market rates are expected to rise closer to the ECB's main refinancing rate once excess liquidity falls below a threshold estimated to be in the range of 100 billion to 200 billion euros.

The six-month Euribor rate rose to 0.330 percent from 0.329 percent while the one-week rate fell to 0.125 percent from 0.126 percent. The overnight Eonia rate rose to 0.127 percent from 0.123 percent.

Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 1000 GMT.

(Reporting by Frankfurt newsroom)

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