Although inflation is currently not an issue that many people are worried about, we all know that the measures currently taken are potentially inflationary, and at some point this will have to be attended to. As one of our colleagues has remarked when “the house is on fire, we need all the fire engines on the scene, the mopping up operations will come later”.
As a result of all these actions, the average level of EONIA, the euro overnight index, has remained close to the minimum bid rate despite higher than usual volatility from a historical perspective. While refraining from being complacent, developments over past months show that the ECB’s operations have positively impacted money market conditions in the Euro area.