FRANKFURT, Jan 9 (Reuters) - The European Central Bank will keep a close eye on developments in money markets and stands ready to act if interbank lending rates rise too high, ECB President Mario Draghi said on Thursday.
Rising bank-to-bank lending rates can be seen as a sign of returning confidence, as banks rely less on the central bank and turn to the market instead, but if the rates rise too fast, too soon they risk scotching the patchy recovery.
“With regard to money market conditions and their potential impact on our monetary policy stance, we are monitoring developments closely and are ready to consider all available instruments,” Draghi told a news conference after the ECB kept its main refinancing rate at 0.25 percent.
“Overall, we remain determined to maintain a high degree of monetary accommodation and to take further decisive action if required.”
In August, Draghi said that expectations of rate hikes in money markets were, according to the ECB’s assessment “unwarranted”.