Good to see the ECB seems to understand it’s about price and not quantity. The reporter isn’t quite there, however.

Maybe when the smoke clears and it turns out no net euros are involved the financial press will get it right. Or maybe they will accuse the ECB of ‘tricking the markets’ by ‘taking out what the put in’ or something equally silly.

Money Market Rates Fall After ECB Offers Unlimited Extra Cash

By Gavin Finch

Dec. 18 (Bloomberg) — The interest rates bank charge each other for two-week loans in euros fell after the European Central Bank said financial institutions can get unlimited emergency cash to ease a year-end shortage in money markets.

The euro interbank offered rate for the loans fell 50 basis points to 4.45 percent, after climbing 83 basis points in the past two weeks, the European Banking Federation said today. That’s 45 basis points more than the ECB’s benchmark interest rate. The three-month borrowing rate fell 7 basis points to 4.88 percent, down from near a seven-year high.

The ECB said late yesterday it will provide as much cash as banks want at or above 4.21 percent to keep interest rates close to its 4 percent refinancing rate. Central banks, led by the Federal Reserve, are seeking to restore confidence to money markets after the collapse of the U.S. subprime-mortgage market.

“It shows how alarmed the ECB is about the turn of the year and the strains” in the market more generally, said Kit Juckes, head of fixed-income research at Royal Bank of Scotland Group Plc in London.

Deposit rates fell earlier, with the amount banks pay on three-month cash in euros falling 15 basis points to 4.76 percent. Banks borrowed 2.435 billion euros ($3.5 billion) at 5 percent yesterday, the most since Sept. 26, the ECB said today.

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