(ECB) The European Central Bank has said it will accelerate the design of a new anti-fragmentation instrument to address borrowing costs in weaker economies.
In a statement following the conclusion of an emergency meeting on Wednesday, ECB said that a pandemic’s scar had led to uneven impacts on the normalization of monetary policy.
The central bank promised to apply flexibility in the way it reinvests bond proceeds of the pandemic stimulus.
ECB’s board member Isabel Schnabel said that the central bank was nearing a point where it would intervene in bond markets. She added that some borrowers had witnessed substantially larger changes in financing conditions, which requires close monitoring.
The ECB meeting conclusions come after investors’ expectations grew following the rushed meeting on Wednesday. Markets were expecting the central bank to announce a policy instrument to help avert a debt crisis that has hit some members.
Jack Allen-Reynolds, the senior Europe economist at Capital Economics, says that the ECB’s announcement fell short. He says there is no guarantee that the central bank will reach a consensus on the new tool before the July meeting.
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