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According to analysts at Nordea Markets, ECB is finding itself considering new stimulus measures again and suggest that the new liquidity operations will be in store, but Euro-area excess liquidity has most likely peaked already.

Key Quotes

“New liquidity operations will be in store, but not yet in March.”

“We see three scenarios for the ECB, depending on what they want to achieve with new liquidity operations.”

“In our baseline, the ECB will try to prevent a relatively rapid fall in excess liquidity and offer new 4-year TLTROs.”

“If the ECB also wants to provide additional monetary policy easing, it needs to find very attractive liquidity operations, possibly with an even longer maturity than four years.”

“In all the scenarios, excess liquidity will fall, but that does not automatically mean that monetary policy would tighten rapidly.”

“TLTROs will probably not be a game-changer for the EUR, but will have curve and spread implications.”