NEW YORK It has finally arrived. The European Central Bank (ECB) has launched a Transmission Protection Instrument (TPI) to prevent monetary policy fragmentation within the eurozone. Announced just after the ECB Governing Council’s July 21 meeting, the TPI has overshadowed the news that the ECB will raise its policy rate by 50 basis points, which is more than expected but
ECB surprised markets by hiking 50bp and going against June’s guidance of a 25bp hike. This has signalled a willingness to front-load tightening. Curves flattened in reaction to the hike.
The European Central Bank toughened its anti-inflationary stance with a 50 basis point hike to interest rates on Thursday and announced a new anti-fragmentation.