ECB preparing for second tranche of cheap funds to spur eurozone economy

Lending rates between banks in the eurozone have fallen to one-year lows, as a result of expectations that the European Central Bank (ECB) will inject hundreds of billions of euros into the money markets at the end of the month to improve liquidity.

According to Reuters, three-month inter-bank lending rates are closing in on the ECB's interest rate of one per cent.

This downward pressure is occurring in anticipation that next week will see a second tranche of incredibly cheap three-year funds, which the news provider reports will have the impact of flooding "the market with hundreds more billions of euros".

In December, the ECB carried out a similar move, injecting more than €500 billion into the eurozone to aid floundering economies and encourage banks to start buying up Italian and Spanish bonds to ease the sovereign debt crisis.

The second tranche of loans is expected to go on offer on February 29th, with demand likely to match or outstrip that seen the first time around, at the end of last year.

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