Independent Strategy

ECB – unintended consequences

The ECB raised its policy rates by 75bp, but made no change to the reinvestment of bonds maturing on its balance sheet. The big change came in amendments to its Targeted Long Term Refinancing Operations (TLTROs). This change is undoubtedly a tightening of monetary policy; but not one that favours the currency because it raises the risks of unintended consequences from liquidity tightening.

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