(Bloomberg) -- The ultra-low interest rate on the European Central Bank’s targeted longer-term refinancing operations will be the next pandemic-era stimulus measure to be pared back, with Bloomberg Economics expecting an increase by 50 basis points in June, lining up the cost of funding with the deposit rate and eliminating risk-free arbitrage opportunities for banks. To prevent a substantial tightening of financial conditions, the ECB will probably simultaneously increase the so-called tiering multiplier to dampen the impact on bank profits and financial conditions -- BE’s base case is a move to 12 from 6. That would create a net cost to the banking system for excess reserves of about 5 billion euros ($5.6 billion) a year, which would be in line with the fee incurred for many parts of 2018 and 2019. 

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