Liquidity conditions and monetary policy operations from 27 July to 1 November 2022

This box describes liquidity conditions and the ECB’s monetary policy operations during the fifth and sixth reserve maintenance periods of 2022.

Metadata

Provider:

ECB

URL:

https://www.ecb.europa.eu//pub/economic-bulletin/focus/2023/html/ecb.ebbox202208_06~f5b2196964.en.html

Retrieved on:

Monday, January 16, 2023

Information

Tags:

Government, MRO, Time, Review, Indian MRO Industry, Governing Council of the European Central Bank, APP, Policy, ECB, Maintenance, PEPP, Environment, Remuneration, Renewable energy, Bank, Security (finance), Eurosystem

Summary

Key Points:

This box describes liquidity conditions and the ECB’s monetary policy operations during the fifth and sixth reserve maintenance periods of 2022.
Together, these two maintenance periods ran from 27 July to 1 November 2022 (the “review period”), thus covering the period when the ECB’s policy rate hikes came into effect.
When the period of negative policy rates ended in July 2022, there were changes in various autonomous factors, notably including government deposits, which altered the composition of excess liquidity.
At the same time, liquidity provided through monetary policy instruments declined over the review period.
At the same time, there was only a marginal increase, of €3.8 billion, in minimum reserve requirements to €162.9 billion.
The end of the negative policy rate environment has in particular led banks to reduce their banknote holdings.
Previously, banks had increased the amounts of vault cash they held amid negative policy rates.
2) Computed as the difference between autonomous liquidity factors on the liabilities side and autonomous liquidity factors on the assets side.
The average amount of liquidity provided through monetary policy instruments decreased by €49.6 billion to €7,076.3 billion during the review period (Chart A).
The reduction in liquidity was mainly driven by the decline in credit operations as a result of voluntary repayments of TLTRO III funds.
[2] Changes in liquidity provided through open market operations and excess liquidity
(EUR billions)
Source: ECB.
*The average amount of liquidity provided through credit operations decreased by €53.7 billion during the review period.
Average excess liquidity increased by €46.5 billion to reach a new record high of €4,569.7 billion (Chart A).
It reflects the difference between the total liquidity provided to the banking system and banks’ liquidity needs.
The difference between the two figures is explained by the rise in average excess liquidity due to lower liquidity-absorbing autonomous factors.