Another small step towards the exit

The ECB will announce the next step in its plan to phase out unconventional policy support this month. This might well be to increase the interest rate on its three-month loans to commercial banks. But its earlier generous provision of long-term loans will mean that there is a very generous supply of liquidity in the banking sector for a long time yet. And with the Bank’s new forecasts likely to suggest that the economic outlook is pretty gloomy, any tightening of conventional monetary policy seems a long way off.