Europe | ECB: New tool aids bold exit from negative rates as inflation risks intensify

Summary

Today decision, this combination of faster rate hikes and a new instrument is most welcome as it signals ECB’s decisive yet prudent approach to monetary policy making in a limiting and highly uncertain environment.

Key points

• Key points:
• All key benchmark interest rates were hiked by 50 bps, larger than previously signaled, justified by high inflation risks, and introduction of a new policy tool
• The Transmission Protection Instrument (TPI) was introduced to address fragmentation risk. All countries will be eligible under four conditional criteria
• Economic outlook has evolved towards deceleration, while inflation pressures have broadened. But a potential recession is yet not included for neither this year nor the next one.

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