ECB’s Rehn says there is no current need to deploy the Transmission Protection Instrument

Olli Rehn, a member of the European Central Bank’s Governing Council, has stated that the ECB sees no current necessity to activate its Transmission Protection Instrument. The TPI, which was designed to prevent disorderly bond market conditions from undermining monetary policy across the eurozone, has sat on the shelf since the day it was created. What the TPI actually is and why it matters The Transmission Protection Instrument was ratified on July 21, 2022, during a period when the ECB was scrambling to address the risk that rapidly rising interest rates could blow out sovereign spreads in weaker eurozone economies. The TPI gives the ECB the authority to purchase public-sector securities on secondary markets when financing conditions deteriorate in ways that aren’t justified by a country’s economic fundamentals. Countries benefiting from TPI purchases need to be in compliance with EU fiscal rules and other governance criteria. Since its creation more than four years ago, the instrument has never been deployed. Rehn’s comments confirm that the ECB sees no fragmentation risk severe enough to change that status quo. The rate decision backdrop Rehn’s remarks come alongside a fresh EC...