ECB confronting painful new reality

Schnabel switches to anti-inflation stringency as central bank works on anti-fragmentation details

 
The European Central Bank’s shift towards monetary tightening and legal hurdles to its new anti-fragmentation tool spell problems for the single currency ahead of the 25 September Italian elections.

Isabel Schnabel, the board member leading the ECB’s shift to anti-inflation stringency, underlined the painful new reality dawning on the central bank in a landmark 27 August statement at the Jackson Hole conference.

Schnabel’s message in the US coincides with a growing likelihood that the ECB will decide against full risk-sharing in its ‘transmission protection instrument’. The measure announced on 21 July to counter centrifugal forces in the euro bloc may operate at less than full firepower because of strictures on the German Bundesbank from past legal rulings on ECB support programmes.

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Πηγή: omfif.org