Dec. 10 (Bloomberg) -- European Central Bank Executive Board member Lorenzo Bini Smaghi said money-market lending rates were too high and central banks would ensure liquidity.
``Money-market rates currently reflect fears of needs for end-year liquidity, but the fears are unjustified,'' Bini Smaghi said today on the sidelines of a banking conference in Florence, Italy. ``The ECB and other central banks will continue to ensure stability in the money markets.''
There's no evidence that fallout from rising mortgage defaults in the U.S. is leading to tighter credit in the 13- nation euro economy, Bini Smaghi said. The cost of borrowing euros for three weeks rose to the highest since at least October 2001 as banks sought funding amid a credit squeeze.
``We can't come to the conclusion that there is a credit crunch currently in course in Europe,'' Bini Smaghi said in a speech. ``That doesn't mean there couldn't be a less favorable evolution going forward. It's important to keep monitoring closely.''
The three-week euro interbank offered rate, the amount banks charge each other for such loans, rose 4 basis points to 4.93 percent, the European Banking Federation said today. That's 93 basis points more than the European Central Bank's benchmark rate.
Bini Smaghi said that the ECB is more concerned about a potential inflation spiral than two years ago because the labor market is tighter than it was then, and because rising inflation may stoke salary increases.
read more:Bini Smaghi Says Money Market Rates `Unjustifiable'
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