FRANKFURT, September 23- The European Central Bank is prepared to make fresh liquidity available to banks if developments in money markets warranted such a move, ECB chief Mario Draghi said Monday.
The ECB was “ready to use any instrument including another LTRO if needed to maintain the short term money markets at the level that is warranted by our assessment of inflation in the medium term,” Draghi told a hearing by the European Parliament’s committee for economic and monetary affairs in Brussels.
The hearing was broadcast via the parliament’s website.
The ECB already pumped more than 1.0 trillion euros ($1.35 trilion) into the banking system via two so-called long-term refinancing operations (or LTROs) in December 2011 and February 2012.
The aim was to avert a potential disastrous credit crunch in the 17 countries that share the euro.
But given the stabilisation of financial markets since then, eurozone banks have started repaying large chunks of those loans.
“While repayment of central bank credit is certainly a sign of normalisation, the resulting reduction in excess liquidity can reinforce upward pressures on term money market rates,” Draghi said.