FRANKFURT, Oct 8: The European Central Bank said on Monday it was prepared to inject more cash into euro money markets in the face of continuing tension caused by difficulties in the US subprime home loan sector.

“The ECB continues to closely monitor liquidity conditions and aims at further reducing the volatility of very short-term rates around the main refinancing operation minimum rate,” the ECB said in a statement to traders.

“For this purpose, the ECB will reinforce its policy of allocating more liquidity than the benchmark amount in main refinancing operations.”

The benchmark amount is the ECB’s weekly evaluation of liquidity needs for the week ahead, the basis on which the central bank offers to lend cash to commercial banks.

The ECB, the guardian of the euro, estimated on Monday that the markets would need 177.5 billion euros in the week ending October 17, which is to replace a previous refinancing operation of 190 billion euros.

The subprime crisis this year has created a credit crunch in which banks are reluctant to lend to each other because they are unsure how much exposure each has to losses stemming from the subprime crisis.

The ECB had hoped to begin withdrawing surplus cash it had injected into the money markets but continued tension has obliged it to hold off for now.—AFP