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Trichet Expects Banks To ''Normalize'' Their Lending Operations
Sunday, 19 October 2008 21:33:16 GMT  |  Luis Gil, DailyFX.com
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European Central Bank President Jean Claude Trichet expressed his confidence in the future of the banking system.

In an interview with French radio station RTL, Trichet said he “expect[s] the banks to normalize their relationships” by lending to each other and to their clients. Despite this optimism the central banker expressed caution, stating that “we’re facing a very important market correction which is lasting” and that “we are facing a very serious systematic liquidity crisis.”

Last weekend’s G7 meeting saw a global effort to curb the soaring overnight cost of borrowing. LIBOR, the benchmark rate used by European banks to charge each other for overnight cash, soared from 2.0% to a high of 4.82% in under four weeks. Since it’s high on Oct. 10, the benchmark rate saw itself decline to a close of 4.42% during Friday’s trading. The credit easing comes after both the Federal Reserve and European Central Bank began granting unlimited amount of liquidity to the banking system.


EURUSD closed Oct. 17 at 1.3400
GBPUSD closed Oct. 17 at 1.7304

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