ECB drains 63.5 bn euros from markets, as planned

FRANKFURT: The European Central Bank easily attracted the 63.5 billion euros of weekly deposits from commercial banks on Tuesday needed to offset its purchases of euro-zone government bonds.

The ECB bought no bonds for the third week running last week and it was also the third time it has stayed out of the market since the programme was introduced at the height of the euro-zone debt crisis in May.

The central bank said 61 banks bid to deposit a total of 90.9 billion euros, well above its 63.5 billion target. The weighted average interest rate it has to pay to commercial banks fell to 0.57 percent, well below the 0.67 percent average paid to banks last week.

The ECB takes seven-day deposits from commercial banks on a weekly basis to offset the total amount it has spent buying bonds since May to avoid stoking inflationary pressures.

The programme remains a controversial issue. Last month ECB Governing Council member Axel Weber renewed his fierce criticism of the purchases, saying they had not worked and called for them to be abolished.

ECB President Jean-Claude Trichet took issue with the comments, saying the Bundesbank chief's outburst did not represent the ECB's view.