The key Euribor bank-to-bank lending rate was unchanged on Friday, continuing its recent holding pattern after key European Central Bank policymakers qualified the bank's use of forward guidance on low interest rates. Abandoning its traditional policy of never pre-committing on future rates, the ECB said on July 4 it would keep its interest rates at present or lower levels for an "extended period" - its first use of so-called forward guidance.
But last week Bundesbank chief Jens Weidmann said the ECB had not "tied itself to the mast" with the vow. Another ECB policymaker, Benoit Coeure, said the bank would decide each and every month whether the pledge was still valid. On Friday, the three-month Euribor rate, traditionally the main gauge of unsecured bank-to-bank lending, remained at 0.220 percent.
The six-month rate ticked up to 0.330 percent from 0.329 percent while the one-week rate remained at 0.098 percent. The overnight Eonia rate rose to 0.091 percent from 0.090 percent. Dollar-priced bank-to-bank Euribor lending rates were mixed, with three-month rates rising to 0.47286 percent from 0.47143 percent and one-week rates unchanged at 0.29286 percent.
Excess liquidity in the euro zone banking sector fell to 249 billion euros, but is still high enough to keep market rates below the ECB's refinancing rate. The ECB said in its monthly bulletin last Thursday that as long as excess liquidity "remains above a certain threshold, estimated to be in the range of 100 billion to 200 billion euros, short-term money market rates are expected to stay slightly above the deposit rate". The ECB's main refi rate is currently at 0.5 percent and the deposit rate at zero.