ECB: Lagarde – Countries must follow EU debt rules to access vehicle

Lagarde said countries must meet certain criteria to access the crisis tool. According to this;

Search criteria:

Compliance with the EU financial framework

Absence of serious macroeconomic imbalances

Financial sustainability

Sound and sustainable macroeconomic policies

The ECB will look at market and transfer data for TPI.

The ECB will then check the eligibility criteria for the TPI.

TPI activation should be proportional to the ECB target.

The ECB prefers not to use TPE, but does not hesitate to use it when necessary.

ECB is accelerating interest rate hikes, it will not change the final interest rate level.

If we look at the TPI criteria, not every country will have equal access to this financial instrument, and troubled countries will need to put their debt criteria on a sustainable basis. How TPI will be applied in a liquidity crisis or debt crisis will depend on multiple indicators. Apparently this is; TPI is not a priority instrument and the ECB will continue to tighten on interest rates. However, there are external asymmetry effects, and the TPI instrument will be activated, especially in monetary transmission disorders that will affect spreads. In other words, it will be a valid crisis tool for sick situations.

Can the ECB raise interest rates by 50 bps or more in September? It is quite uncertain, it is necessary to look at the extent of the energy problem towards winter. There is too much uncertainty. Lagarde’s statement that neutral rates haven’t risen is countervailing to the short-term pace of action.

Kaynak Tera Yatırım / Enver Erkan
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