BRUSSELS (Reuters) - The European Central Bank cannot maintain its current strong support of money markets forever, the bank's President Jean-Claude Trichet said on Monday.
The ECB has been pumping billions of euros into money markets over the duration of the crisis in an attempt to restore order and to reduce the cost of borrowing for banks, firms and consumers.
For many commercial banks it has become the dominant source of funding, but Trichet stressed the situation could not continue indefinitely.
"The strong intervention of the Eurosystem in the euro area money market cannot be maintained forever," Trichet told a hearing of a European Parliament committee.
"We have introduced exceptional measures under exceptional circumstances. We will have to phase them out once the rationale for these measures fades away and the situation normalizes."
However he remained clear that, while the economic situation was improving, it was not yet time for the ECB to retract its support.
"Now is not the time to exit. However, at some point in time exit strategies will have to be implemented," he said, echoing comments made by policymakers over the last few weeks.
"The ECB has an exit strategy and stands ready to put it into action when the appropriate time comes. Our exit strategy is an integral part of our overall monetary policy strategy."
The introduction of one-year lending to banks is one of the measures the ECB brought in during the financial crisis. It holds the second of its three planned one-year refi tenders this week.
A Reuters poll showed on Monday that traders expect the ECB to start withdrawing the massive amounts of liquidity it has pumped into markets within a year.
(Reporting by Marc Jones; Editing by Victoria Main)
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