ECB Confronted by Banks Testing Exit, Threat to Recovery

Rising market rates are posing a dilemma for European Central Bank officials trying to keep their ultra-expansive monetary policy in place.

Overnight borrowing costs for banks have surged above the ECB’s benchmark rate even as policy makers argue that it’s not yet time to exit emergency stimulus. When officials meet in Frankfurt on Feb. 6 they’ll have to assess whether the tighter financing conditions show a resurgence of tensions that warrant a policy response or simply increased confidence in the region’s economic recovery.