The European Central Bank's overnight deposit volume remained stable at 2.18 trillion, indicating that market liquidity remains highly abundant.
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⑴ Data released by the European Central Bank on Tuesday showed that financial institutions borrowed only 78 million euros through the overnight loan facility, continuing to remain at an extremely low level compared to the previous day's 89 million euros. This reflects a very limited demand for marginal liquidity in the banking system. ⑵ Meanwhile, the use of the overnight deposit facility reached 2,186.121 billion euros, a slight increase from the previous day's 2,183.556 billion euros, indicating that a large amount of excess liquidity remains deposited on the central bank's balance sheet. ⑶ The current account holdings rose from 19,431.8 billion euros to 20,095.1 billion euros, showing that banks' reserve balances at the central bank have increased, and the overall liquidity environment remains accommodative. ⑷ The significant gap between the overnight loan facility and the deposit facility persists, highlighting that under the European Central Bank’s policy rate corridor framework, financial institutions are more inclined to deposit idle funds with the central bank rather than lending them out, with risk appetite staying relatively conservative. ⑸ Looking ahead, the focus will be on how the European Central Bank’s future monetary policy path adjusts the deposit facility rate, as well as the banking system’s ability to respond during the gradual withdrawal of excess liquidity.
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