The Governing Council of the ECB convened in an emergency meeting has opened the yard for a new “anti-fragmentation” instrument, the anti-spread shield to defend the transmission of monetary policy
by Isabella Bufacchi
The Governing Council of the ECB met to exchange views on the current market situation. Following the start of the gradual process of monetary policy normalization in December 2021, the Governing Council has pledged to take action against the recurring risks of fragmentation. The pandemic has left lasting vulnerabilities in the euro area economy which are effectively contributing to an uneven transmission of monetary policy normalization across jurisdictions.
Based on this assessment, the Governing Council has decided that it will apply flexibility in the reinvestment of maturing redemptions in the pandemic portfolio, in order to preserve the functioning of the monetary policy transmission mechanism, which is essential for the ECB to be able to fulfill its mandate to price stability.
In addition, the Governing Council has decided to mandate the relevant Eurosystem committees, together with the ECB services, to accelerate the completion of the design of a new anti-fragmentation tool for consideration by the Governing Council.
