(Bloomberg) -- The ultra-low interest rate on the European Central Bank’s targeted longer-term refinancing operations will be eliminated in June, as the Governing Council continues to pare back its pandemic-era stimulus measures -- probably the first step in completely winding down those lending operations. Bloomberg Economics expects the interest rate on TLTROs to be increased by 50 basis points next month, lining up the cost of funding with the deposit rate and eliminating risk-free arbitrage opportunities for banks. The ECB will probably have no need to adjust its tiering multiplier, currently at six, because rate hikes in July and September will bring the deposit rate to zero. With no looming cliff edge for funding, an announcement on additional auctions is likely to be delayed until at least the end of the year.

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