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Lagarde: Can Design And Deploy New Tools To Mitigate Fragmentation Risks

ECB
Fixed IncomeBulletMarketsEmerging MarketsForeign Exchange

ECB Pres Lagarde's blog post touches on a potential new tool to mitigate fragmentation risks. Note MNI's sources piece last week pointing out that discussions on such a new instrument are still at an early stage ("ECB Mulls Crisis Tool As Debate Spreads"):

  • Lagarde: "Any future decisions on the balance sheet will have to be consistent with both the evolving medium-term inflation outlook and our pledge to ensure policy transmission – especially as flexible reinvestment of the PEPP portfolio is a tool we have made available to mitigate fragmentation risks."
  • "If necessary, we can design and deploy new instruments to secure monetary policy transmission as we move along the path of policy normalisation, as we have shown on many occasions in the past."
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ECB Pres Lagarde's blog post touches on a potential new tool to mitigate fragmentation risks. Note MNI's sources piece last week pointing out that discussions on such a new instrument are still at an early stage ("ECB Mulls Crisis Tool As Debate Spreads"):

  • Lagarde: "Any future decisions on the balance sheet will have to be consistent with both the evolving medium-term inflation outlook and our pledge to ensure policy transmission – especially as flexible reinvestment of the PEPP portfolio is a tool we have made available to mitigate fragmentation risks."
  • "If necessary, we can design and deploy new instruments to secure monetary policy transmission as we move along the path of policy normalisation, as we have shown on many occasions in the past."