June 28, 2018 / 8:20 AM / 20 days ago

ECB to have new overnight reference rate ready by October 2019

FRANKFURT (Reuters) - The European Central Bank will publish its new unsecured overnight interest rate by October 2019, it said on Thursday, taking another step in devising what could become a new benchmark after confidence in previous indicators was shaken.

President of the European Central Bank Mario Draghi listens during the news conference following the meeting of the Governing Council of the European Central Bank in Riga, Latvia June 14, 2018. REUTERS/Ints Kalnins

The Euro Interbank Offered Rate (Euribor) and Euro Overnight Index Average (Eonia) are used to calibrate monetary policy, price trillions of euros worth of derivatives and, in some countries, to determine interest rates on mortgages.

But confidence in them has waned as allegations of fraud and sharply lower volumes raised the specter of distortions that could affect asset prices and thwart the transmission of the ECB’s monetary policy to the real economy.

The ECB decided to devise a new rate reference rate called euro short-term rate (ESTER) after industry-led reforms failed.

Reporting by Balazs Koranyi; Editing by Toby Chopra

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