WSJ: ECB to Pull Back Some Stimulus Aid - by Brian Blackstone

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The European Central Bank is expected Thursday to announce steps to slowly absorb some of the hundreds of billions of euros it pumped into banks since the peak of the crisis, starting with an end to cheap one-year loans next year. That extraordinary lending program was aimed at countering the collapse of confidence in credit markets at the height of the crisis this year. ECB President Jean-Claude Trichet said recently that cheap loans from the central bank can only be temporary, and warned that European lenders should avoid "addiction" to central-bank aid. With inflation still low, officials are expected to proceed cautiously in ending monetary stimulus, because of worries over the recovery's durability and the euro's strength. Inflation remains far below the ECB's medium-term goal of just under 2%, suggesting officials won't raise their key lending rate, currently 1%, until well into 2010 at the earliest.