At its council meeting in July, the central bank raised interest rates for the first time in eleven years. Further steps are likely to follow in the coming months.
(Photo: imago images/Jochen Tack)
Frankfurt The plans of the European Central Bank (ECB) for the new crisis instrument with the abbreviation TPI were initially well received by investors. Yields on 10-year Italian government bonds fell significantly after the central bank published details on Thursday.
The instrument enables the ECB to make targeted and unlimited purchases of bonds from individual euro countries, which the central bank can use to stop a sharp rise in risk premiums (spreads) compared to German government bonds. In this way, a debt crisis can be avoided if necessary.
The European economist at the US investment bank Goldman Sachs, Jari Stehn, rates the TPI as “potentially very effective”. But he also says: “Given the uncertainty about the criteria for the TPI, the market could test the willingness of the ECB to use it.” This is particularly true in relation to Italy. Stehn points out that the criteria for the TPI are “relatively broad”.
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