{"text":[[{"start":8.65,"text":"Almost €3tn of emergency liquidity injected by the European Central Bank during the Covid-19 pandemic will have drained from the financial system by 2027, marking a milestone in the normalisation of monetary policy."}],[{"start":24.53,"text":"According to a forecast published by the central bank’s staff on Thursday, the excess liquidity that banks in the Eurozone deposit at the ECB will fall below €2tn next year, a level last seen before policymakers embarked on the unprecedented stimulus in early 2020. "}],[{"start":43.81,"text":"“It marks the end of an era,” said Carsten Brzeski, global head of macro at ING. “The state of emergency in European monetary policy is coming to a close,” he added, saying that the ECB managed to engineer the exit from its quantitative easing smoothly. "}],[{"start":62.46,"text":"From March 2020, the central bank embarked on its so-called Pandemic Emergency Purchase Programme (PEPP). This involved hoovering up government and private sector bonds in an attempt to stabilise and stimulate the pandemic-ravaged economy. It also offered several generous and longer-term refinancing operations to banks. "}],[{"start":85.78999999999999,"text":"Most economists credit the ECB with preventing a wider economic meltdown as conventional monetary policy had at the time run out of firepower; interest rates were in negative territory before the pandemic hit."}],[{"start":100.41999999999999,"text":"However, critics of the policy warned that the flood of liquidity may have distorted asset prices as it inflated a real estate frenzy in countries including Germany. They also blamed the PEPP for contributing to surging inflation from late 2021. Orthodox economists had warned that the unconventional measures may never be unwound."}],[{"start":126.25999999999999,"text":"The ECB phased out its unconventional monetary policy tools from 2022, resulting in a steady decline of liquidity, which had more than doubled to €4.8tn by October 2022. But the unwinding takes time: The ECB is not actively selling the bonds it bought during the crisis but instead lets them mature. Since the end of 2024, the central bank has not reinvested the proceeds but lets the bonds just run off. "}],[{"start":156.04,"text":"As a consequence, excess liquidity that banks are parking with the ECB has come down by close to 50 per cent and will shrink further by 2027. "}],[{"start":null,"text":"
"}],[{"start":167.43,"text":"ECB executive board member Isabel Schnabel has called this process “quantitative normalisation rather than quantitative tightening”. "}],[{"start":177.28,"text":"So far, the return to normality is unfolding smoothly, according to the central bank’s analysis published on Thursday. “There are no signs of fragmentation,” the ECB blog says. "}],[{"start":190.52,"text":"Banks will now “have to more actively manage their liquidity”, the ECB economists say in the blog. They predict that banks will start to rely more heavily on the money market as well as standard refinancing operations. "}],[{"start":205.15,"text":"Banks can access liquidity from the ECB at a mark-up of 0.15 percentage points to the main deposit rate, which currently stands at 2 per cent. While these tools have been scarcely used in recent years, they will become more popular with further declines in excess liquidity, the ECB staff predict. "}],[{"start":235.33,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1775179036_1540.mp3"}