In its latest move to combat the euro zone’s spiraling inflation, the European Central Bank, announced on Friday that banks in the eurozone will start repaying 296 billion euros in multi-year loans next week.
For the first voluntary payback window of the ECB’s Targeted Longer Term Refinancing Operation (TLTRO), after terms were altered last month, this is less than the approximately 500 billion euros that many analysts had anticipated.
By eliminating a rate subsidy last month, the ECB gave banks a reason to cancel those loans. It was its first attempt to seize money from the banking sector and the beginning of the process of winding down its significant bond purchases.
When deciding how quickly to reverse the ECB’s 3.3 trillion euro Asset Purchase Program, which will be a topic of discussion at their meeting on December 15, policymakers for the central bank will examine how the market responds to this unexpected drop in cash.
Next month, banks will have another payback window.
