Editing European Central Bank (section)

==History==
[[File:Euro inflation.webp|thumb|Euro zone inflation]]
{{Further|History of the euro}}

=== Early years (1998–2007) ===
[[File:Wim Duisenberg.jpg|thumb|upright=0.7|right|[[Wim Duisenberg]], first President of the ECB]]
The European Central Bank is the ''de facto'' successor of the [[European Monetary Institute]] (EMI).<ref name="ECB-2007a">{{cite web|url=http://www.ecb.int/ecb/history/emu/html/index.en.html |title=ECB: Economic and Monetary Union|publisher=ECB |access-date=15 October 2007}}</ref> The EMI was established at the start of the second stage of the EU's [[Economic and Monetary Union of the European Union|Economic and Monetary Union]] (EMU) to handle the transitional issues of states adopting the euro and prepare for the creation of the ECB and [[European System of Central Banks]] (ESCB).<ref name="ECB-2007a"/>  The EMI itself took over from the earlier [[European Monetary Cooperation Fund]] (EMCF).<ref name="CVCE-2016">{{cite web |title=European Central Bank |publisher=CVCE |url=http://www.cvce.eu/obj/european_central_bank-en-fc8d2e17-cbde-4ec8-8f79-46f06c471540.html |access-date=18 February 2014|date=7 August 2016 }}</ref>

The ECB formally replaced the EMI on 1 June 1998 by virtue of the [[Treaty on European Union]] (TEU, Treaty of Maastricht), however it did not exercise its full powers until the [[introduction of the euro]] on 1 January 1999, signalling the third stage of EMU.<ref name="ECB-2007a"/> The bank was the final institution needed for EMU, as outlined by the EMU reports of [[Pierre Werner]] and President [[Jacques Delors]]. It was established on 1 June 1998 The first [[List of Presidents of the European Central Bank|President of the Bank]] was [[Wim Duisenberg]], the former president of the [[De Nederlandsche Bank|Dutch central bank]] and the [[European Monetary Institute]].<ref name="Ecb.int-2011">{{cite web|title=ECB: Economic and Monetary Union|url=http://www.ecb.int/ecb/history/emu/html/index.en.html|access-date=26 June 2011|publisher=Ecb.int}}</ref> While Duisenberg had been the head of the EMI (taking over from [[Alexandre Lamfalussy]] of Belgium) just before the ECB came into existence,<ref name="Ecb.int-2011" /> the French government wanted [[Jean-Claude Trichet]], former head of the [[Banque de France|French central bank]], to be the ECB's first president.<ref name="Ecb.int-2011" /> The French argued that since the ECB was to be located in Germany, its president should be French. This was opposed by the German, Dutch and Belgian governments who saw Duisenberg as a guarantor of a strong euro.<ref name="ENA EMU3">{{cite web |title=The third stage of Economic and Monetary Union |publisher=CVCE |url=http://www.cvce.eu/obj/the_third_stage_of_economic_and_monetary_union-en-e2e91dc0-3a6d-49fc-b3f8-f96fb5f3addb.html |access-date=18 February 2014 |date=7 August 2016}}</ref> Tensions were abated by a [[gentleman's agreement]] in which Duisenberg would stand down before the end of his mandate, to be replaced by Trichet.<ref>{{cite web |url=https://www.flickr.com/photos/uggboy/4417740330/ |title=The powerful European Central Bank [E C B] in the heart of Frankfurt/Main&nbsp;– Germany&nbsp;– The Europower in Mainhattan&nbsp;– Enjoy the glances of euro and europe....03/2010....travel round the world....:)|work=UggBoy♥UggGirl [PHOTO // WORLD // TRAVEL] |publisher=Flickr |date=6 March 2010 |access-date=14 October 2011}}</ref>

Trichet replaced Duisenberg as president in November 2003. Until 2007, the ECB had very successfully managed to maintain inflation close but below 2%.

[[File:Mario Draghi World Economic Forum 2013 crop.jpg|thumb|upright=0.7|right|[[Mario Draghi]], President of the ECB between 2011 and 2019]]

=== Response to the financial crises (2008–2014) ===
The European Central Bank underwent through a deep internal transformation as it faced the [[2008 financial crisis]] and the [[European debt crisis]]. 
{{Expand section|here we need some headline facts on the early response to the Lehman shock: interest cuts, repos & swap lines, securitized bond purchases…|date=April 2021}}

==== Early response to the Eurozone debt crisis ====
{{main|European debt crisis}}The so-called ''[[European debt crisis]]'' began after Greece's new elected government uncovered the real level of indebtedness and budget deficit and warned EU institutions of the imminent danger of a Greek [[sovereign default]].

Foreseeing a possible sovereign default in the eurozone, the general public, international and European institutions, and the financial community reassessed the economic situation and creditworthiness of some Eurozone member states. Consequently, sovereign bonds yields of several Eurozone countries started to rise sharply. This provoked a self-fulfilling panic on financial markets: the more Greek bonds yields rose, the more likely a default became possible, the more bond yields increased in turn.<ref>{{Cite news|url=https://www.reuters.com/article/idUSLDE61F0W720100216|title=Peripheral euro zone government bond spreads widen|first=George|last=Matlock|date=16 February 2010|access-date=28 April 2010|work=Reuters}}</ref><ref>{{cite news|url=http://www.economist.com/node/16009099|title=Acropolis now|date=29 April 2010|newspaper=The Economist|access-date=22 June 2011}}</ref><ref name="wsj">{{Cite news|url=https://www.wsj.com/articles/SB10001424052748704041504575045743430262982|title=Global Markets Shudder: Doubts About U.S. Economy and a Debt Crunch in Europe Jolt Hopes for a Recovery|first1=Brian|last1=Blackstone|date=5 February 2010|work=The Wall Street Journal|access-date=10 May 2010|first2=Tom|last2=Lauricella|first3=Neil|last3=Shah}}</ref><ref>[https://www.nytimes.com/2012/03/06/world/europe/geir-haarde-former-iceland-leader-goes-on-trial-for-role-in-financial-crisis.html "Former Iceland Leader Tried Over Financial Crisis of 2008"], ''The New York Times'', 5 March 2012. Retrieved 30 May 2012.</ref><ref>{{citation|title=Greek/German bond yield spread more than 1,000 bps|date=28 April 2010|publisher=Financialmirror.com}}</ref><ref>{{cite web|url=http://www.ft.com/cms/s/0/7d25573c-1ccc-11df-8d8e-00144feab49a.html |archive-url=https://ghostarchive.org/archive/20221210/http://www.ft.com/cms/s/0/7d25573c-1ccc-11df-8d8e-00144feab49a.html |archive-date=10 December 2022 |url-access=subscription|title=Gilt yields rise amid UK debt concerns|date=18 February 2010 |work=Financial Times |access-date=15 April 2011}}{{registration required}}</ref><ref>{{cite web|url=http://www.voxeu.org/index.php?q=node/3454|title=The politics of the Maastricht convergence criteria &#124; vox&nbsp;– Research-based policy analysis and commentary from leading economists|date=15 April 2009|publisher=Voxeu.org|access-date=1 October 2011}}</ref>

This panic was also aggravated because of the reluctance of the ECB to react and intervene on sovereign bond markets for two reasons. First, because the ECB's legal framework normally forbids the purchase of sovereign bonds in the primary market (Article 123. TFEU),<ref>Bagus, ''The Tragedy of the Euro'', 2010, p.75.</ref> An over-interpretation of this limitation, inhibited the ECB from implementing [[quantitative easing]] like the Federal Reserve and the Bank of England did as soon as 2008, which played an important role in stabilizing markets.

Secondly, a decision by the ECB made in 2005 introduced a minimum credit rating (BBB-) for all Eurozone sovereign bonds to be eligible as collateral to the ECB's open market operations. This meant that if a private rating agencies were to downgrade a sovereign bond below that threshold, many banks would suddenly become illiquid because they would lose access to ECB refinancing operations. According to former member of the governing council of the ECB [[Athanasios Orphanides]], this change in the ECB's collateral framework "planted the seed" of the euro crisis.<ref>{{Cite web|url=https://voxeu.org/article/how-ecb-planted-seeds-euro-area-crisis|title=Monetary policy and fiscal discipline: How the ECB planted the seeds of the euro area crisis|last=Orphanides|first=Athanasios|date=9 March 2018|website=VoxEU.org|access-date=22 September 2018}}</ref>

Faced with those regulatory constraints, the ECB led by Jean-Claude Trichet in 2010 was reluctant to intervene to calm down financial markets. Up until 6 May 2010, Trichet formally denied at several press conferences<ref>{{Cite press release|url=https://www.ecb.europa.eu/press/pressconf/2010/html/is100506.en.html|title=Introductory statement with Q&A|website=European Central Bank|language=en|access-date=3 October 2018}}</ref> the possibility of the ECB to embark into sovereign bonds purchases, even though Greece, Ireland, Portugal, Spain and Italy faced waves of [[credit rating]] downgrades and increasing interest rate spreads.

==== Market interventions (2010–2011) ====
[[File:ECB SMP Bond Purchases.png|thumb|upright=0.9|ECB Securities Markets Programme (SMP) covering bond purchases since May 2010]]
In a remarkable u-turn, the ECB announced on 10 May 2010,<ref>{{Cite press release|url=https://www.ecb.europa.eu/press/pr/date/2010/html/pr100510.en.html|title=ECB decides on measures to address severe tensions in financial markets|website=European Central Bank|language=en|access-date=22 September 2018}}</ref> the launch of a "Securities Market Programme" (SMP) which involved the discretionary purchase of sovereign bonds in secondary markets. Extraordinarily, the decision was taken by the Governing Council during a teleconference call only three days after the ECB's usual meeting of 6 May (when Trichet still denied the possibility of purchasing sovereign bonds). The ECB justified this decision by the necessity to "address severe tensions in financial markets." The decision also coincided with the EU leaders decision of 10 May to establish the European Financial Stabilisation mechanism, which would serve as a crisis fighting fund to safeguard the euro area from future sovereign debt crisis.<ref>{{Cite news|url=https://euobserver.com/economic/30048|title=Mixed support for ECB bond purchases|access-date=22 September 2018|language=en}}</ref>

Although at first limited to the debt of Greece, Ireland and Portugal, the bulk of the ECB's bond buying eventually consisted of Spanish and Italian debt.<ref>{{cite news |first1=John |last1=McManus |first2=Dan |last2=O'Brien |title=Market rout as Berlin rejects call for more EU action |journal=Irish Times |date=5 August 2011 }}</ref> These purchases were intended to dampen international speculation against stressed countries, and thus avoid a contagion of the Greek crisis towards other Eurozone countries. The assumption—largely justified—was that speculative activity would decrease over time and the value of the assets increase.

Although SMP purchases did inject liquidity into financial markets, all of these injections were "sterilized" through weekly liquidity absorption. So the operation was net neutral in liquidity terms (though this was of little practical importance since normal monetary policy operations were ensuring unlimited supplies of liquidity at the main policy interest rate).<ref name="Euro debt working paper">{{cite web|date=February 2011|title=WOrking paper 2011 / 1 A Comprehensive approach to the EUro-area debt crisis|url=http://unipub.lib.uni-corvinus.hu/304/1/wp_2011_1_darvas.pdf|access-date=28 October 2011|work=Zsolt Darvas|publisher=Corvinus University of Budapest}}</ref>{{Citation needed|reason=Reference does not mention 'sterilized injections' or 'liquidity absorption'. Add page number, or a different source.|date=April 2019}}<ref>{{Cite web|date=June 2010|title=Euro area money growth and the 'Securities and Markets Programme'|url=https://www.ecb.europa.eu/pub/pdf/other/mb201006_focus01.en.pdf|website=European Central Bank}}</ref>

In September 2011, ECB's Board member [[Jürgen Stark]], resigned in protest against the "Securities Market Programme" which involved the purchase of sovereign bonds from Southern member states, a move that he considered as equivalent to [[monetary financing]], which is prohibited by the EU Treaty. The ''[[Financial Times Deutschland]]'' referred to this episode as "the end of the ECB as we know it", referring to its hitherto perceived "hawkish" stance on inflation and its historical [[Deutsche Bundesbank]] influence.<ref>{{cite news|author=Proissl, von Wolfgang|date=9 September 2011|title=Das Ende der EZB, wie wir sie kannten|language=de|trans-title=The end of the ECB, as we knew it|work=[[Financial Times Deutschland]]|department=Kommentar|url=http://www.ftd.de/politik/europa/:stark-ruecktritt-das-ende-der-ezb-wie-wir-sie-kannten/60102214.html|url-status=dead|archive-url=https://web.archive.org/web/20111015235754/http://www.ftd.de/politik/europa/%3Astark-ruecktritt-das-ende-der-ezb-wie-wir-sie-kannten/60102214.html|archive-date=15 October 2011}}</ref>

As of 18 June 2012, the ECB in total had spent €212.1bn (equal to 2.2% of the Eurozone GDP) for bond purchases covering outright debt, as part of the Securities Markets Programme.<ref>{{cite web|url=http://www.commbank.com.au/corporate/research/publications/economics/economic-issues/international/2012/180612-ECB.pdf|title=The ECB's Securities Market Programme (SMP) – about to restart bond purchases?|work=Global Markets Research – International Economics|publisher=Commonwealth Bank|date=18 June 2012|access-date=21 April 2013}}</ref> Controversially, the ECB made substantial profits out of SMP, which were largely redistributed to Eurozone countries.<ref>{{Cite news|url=http://www.positivemoney.eu/2018/07/ecb-smp-profits-billions-lost-for-greece/|title=How Greece lost billions out of an obscure ECB programme|date=25 July 2018|work=Positive Money Europe|access-date=25 September 2018|language=en-GB}}</ref><ref>{{Cite web|url=http://www.guengl.eu/news/article/the-ecb-as-vulture-fund-how-central-banks-speculated-against-greece-and-won|title=The ECB as vulture fund: how central banks speculated against Greece and won big – GUE/NGL – Another Europe is possible|website=guengl.eu|language=en|access-date=25 September 2018|archive-date=26 September 2018|archive-url=https://web.archive.org/web/20180926014354/http://www.guengl.eu/news/article/the-ecb-as-vulture-fund-how-central-banks-speculated-against-greece-and-won|url-status=dead}}</ref> In 2013, the [[Eurogroup]] decided to refund those profits to Greece, however, the payments were suspended from 2014 until 2017 over the conflict between [[Yanis Varoufakis]] and ministers of the Eurogroup. In 2018, profits refunds were reinstalled by the Eurogroup. However, several NGOs complained that a substantial part of the ECB profits would never be refunded to Greece.<ref>{{Cite news|url=http://www.positivemoney.eu/2018/10/petition-eurogroup-return-ecb-profits-to-greece/|title=Unfair ECB profits should be returned to Greece, 117,000 citizens demand|date=19 October 2018|work=Positive Money Europe|access-date=21 October 2018|language=en-GB}}</ref>

====Role in the Troika (2010–2015) ====
[[File:Europe bonds sovereign debt crisis.webp|thumb|300px|European 10 year bonds, before the [[Great Recession in Europe]] bonds floated together in parity
{{legend-line|#001489 solid 3px|[[Greece]] 10 year bond}}
{{legend-line|#046A38 solid 3px|[[Portugal]] 10 year bond}}
{{legend-line|#FF8200 solid 3px|[[Republic of Ireland|Ireland]] 10 year bond}}
{{legend-line|#F1BF00 solid 3px|[[Spain]] 10 year bond}}
{{legend-line|#CD212A solid 3px|[[Italy]] 10 year bond}}
{{legend-line|#970E53 solid 3px|[[France]] 10 year bond}}
{{legend-line|#000000 solid 3px|[[Germany]] 10 year bond}}
]]
{{See also|Greek government-debt crisis|Post-2008 Irish banking crisis|European debt crisis}}
The ECB played a controversial role in the "[[European troika|Troika]]" by rejecting most forms of debt restructuring of public and bank debts,<ref>{{Cite news|last=O'Connell|first=Hugh|title=Everything you need to know about the promissory notes, but were afraid to ask|language=en|work=TheJournal.ie|url=http://www.thejournal.ie/anglo-promissory-notes-ecb-775366-Feb2013/|access-date=3 October 2018}}</ref> and pressing governments to adopt bailout programmes and structural reforms through secret letters to Italian, Spanish, Greek and Irish governments. It has further been accused of interfering in the [[Greek referendum 2015|Greek referendum of July 2015]] by constraining liquidity to Greek commercial banks.<ref>{{Cite web|date=2017-03-28|title=Transparency International EU|url=https://transparency.eu/ecb|access-date=2021-04-03|website=Transparency International EU|language=en}}</ref>
{{Expand section|explanations on the role of ECB for Greece, Italy, Spain, Cyprus, Portugal.|date=April 2021}}
In November 2010, reflecting the huge increase in borrowing, including the cover the cost of having guaranteed the liabilities of banks, the cost of borrowing in the private financial markets had become prohibitive for the Irish government. Although it had deferred the cash cost of recapitalising the failing Anglo Irish Bank by nationalising it and issuing it with a "promissory note" (an IOU), the Government also faced a large deficit on its non-banking activities, and it therefore turned to the official sector for a loan to bridge the shortfall until its finances were credibly back on a sustainable footing. Meanwhile, Anglo used the promissory note as collateral for its emergency loan (ELA) from the Central Bank. This enabled Anglo to repay its depositors and bondholders.

It became clear later that the ECB played a key role in making sure the Irish government did not let Anglo default on its debts, to avoid financial instability risks. On 15 October and 6 November 2010, the ECB President [[Jean-Claude Trichet]] sent two secret letters<ref>{{Cite press release|url=https://www.ecb.europa.eu/press/html/irish-letters.en.html|title=Irish letters|website=European Central Bank|language=en|access-date=3 October 2018}}</ref> to the Irish finance Minister which essentially informed the Irish government of the possible suspension of ELA's credit lines, unless the government requested a financial assistance programme to the [[Eurogroup]] under the condition of further reforms and fiscal consolidation.

In addition, the ECB insisted that no debt restructuring (or [[bail-in]]) should be applied to the nationalized banks' bondholders, a measure which could have saved Ireland 8 billion euros.<ref>{{Cite news|url=https://www.irishtimes.com/business/financial-services/chopra-ecb-refusal-to-burn-bondholders-burdened-taxpayers-1.2347861|title=Chopra: ECB refusal to burn bondholders burdened taxpayers|newspaper=The Irish Times|access-date=3 October 2018|language=en-US}}</ref>

During 2012, the ECB pressed for an early end to the ELA, and this situation was resolved with the liquidation of the successor institution IBRC in February 2013. The promissory note was exchanged for much longer term marketable floating rate notes which were disposed of by the Central Bank over the following decade.

In April 2011, the ECB raised interest rates for the first time since 2008 from 1% to 1.25%,<ref>{{Cite news|last1=Blackstone|first1=Brian|year=2011|title=ECB Raises Interest Rates&nbsp;– MarketWatch|work=marketwatch.com|url=http://www.marketwatch.com/story/ecb-raises-interest-rates-2011-04-07|access-date=14 July 2011}}</ref> with a further increase to 1.50% in July 2011.<ref>{{cite web|year=2011|title=ECB: Key interest rates|url=http://www.ecb.int/stats/monetary/rates/html/index.en.html|access-date=29 August 2011}}</ref> However, in 2012–2013 the ECB sharply lowered interest rates to encourage economic growth, reaching the historically low 0.25% in November 2013.<ref name="rates">{{cite web|url=https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html|title=Key ECB interest rates|website=ecb.europa.eu|access-date=3 May 2025}}</ref> Soon after the rates were cut to 0.15%, then on 4 September 2014 the central bank reduced the rates by two-thirds from 0.15% to 0.05%.<ref name="ECBcuts">{{cite news|date=4 September 2014|title=Draghi slashes interest rates, unveils bond-buying plan|publisher=europenews.net|url=http://www.europenews.net/index.php/sid/225407609|access-date=5 September 2014}}</ref> Recently, the interest rates were further reduced reaching 0.00%, the lowest rates on record.<ref name="rates" />

In a report adopted on 13 March 2014, the [[European Parliament]] criticized the "potential conflict of interest between the current role of the ECB in the Troika as 'technical advisor' and its position as a creditor of the four Member States, as well as its mandate under the Treaty". The report was led by Austrian right-wing MEP [[Othmar Karas]] and French Socialist MEP [[Liêm Hoang-Ngoc|Liem Hoang Ngoc]].

====Response under Mario Draghi (2012–2015)====

[[File:ECB balance sheet.png|thumb|ECB balance sheet]]
[[File:ECB deposit facility.svg|thumb|ECB deposit facility]]
[[File:Current accounts at the ECB.png|thumb|Current accounts at the ECB]]

On 1 November 2011, [[Mario Draghi]] replaced Jean-Claude Trichet as President of the ECB.<ref>{{Cite news|date=1 November 2011|title=Mario Draghi takes centre stage at ECB|work=BBC|url=https://www.bbc.com/news/business-13901139|access-date=28 December 2011}}</ref> This change in leadership also marks the start of a new era under which the ECB will become more and more interventionist and eventually ended the [[European debt crisis|Eurozone sovereign debt crisis]].

Draghi's presidency started with the impressive launch of a new round of 1% interest loans with a term of three years (36 months) – the '''Long-term Refinancing operations (LTRO)'''. Under this programme, 523 Banks tapped as much as €489.2 bn (US$640 bn). Observers were surprised by the volume of loans made when it was implemented.<ref name="ECB82011">{{cite press release|url=http://www.ecb.int/press/pressconf/2011/html/is111208.en.html|title=Introductory statement to the press conference (with Q&A)|first1=Mario|last1=Draghi|author2=President of the ECB|date=8 December 2011|publisher=European Central Bank|location=Frankfurt am Main|format=Press conference|access-date=22 December 2011|first3=Vítor|last3=Constâncio|author4=Vice-President of the ECB}}</ref><ref name="NYTloans">{{cite news|url=https://www.nytimes.com/2011/12/22/business/global/demand-for-ecb-loans-surpasses-expectations.html|title=European Bank in Strong Move to Loosen Credit|first1=Nelson D.|last1=Schwartz|date=21 December 2011|newspaper=The New York Times|access-date=22 December 2011|first2=David|last2=Jolly|quote=the move, by the European Central Bank, could be a turning point in the Continent's debt crisis}}</ref><ref name="NYTNorris">{{cite news|url=https://www.nytimes.com/2011/12/22/business/a-central-bank-doing-what-central-banks-do.html |archive-url=https://ghostarchive.org/archive/20220101/https://www.nytimes.com/2011/12/22/business/a-central-bank-doing-what-central-banks-do.html |archive-date=2022-01-01 |url-access=limited|title=A Central Bank Doing What It Should|first=Floyd|last=Norris|date=21 December 2011|newspaper=The New York Times|access-date=22 December 2011|format=Analysis}}{{cbignore}}</ref> By far biggest amount of {{Nowrap|€325bn}} was tapped by banks in Greece, Ireland, Italy and Spain.<ref>{{cite news|url=https://www.theguardian.com/business/2012/feb/29/eurozone-debt-crisis-ecb-loans-ltro#block-3|title=Eurozone crisis live: ECB to launch massive cash injection|last1=Wearden|first1=Graeme|date=29 February 2012|work=The Guardian|access-date=29 February 2012|last2=Fletcher|first2=Nick|location=London}}</ref> Although those LTROs loans did not directly benefit EU governments, it effectively allowed banks to do a [[carry trade]], by lending off the LTROs loans to governments with an interest margin. The operation also facilitated the rollover of {{Nowrap|€200bn}} of maturing bank debts<ref>{{cite news|last1=Ewing|first1=Jack|last2=Jolly|first2=David|date=21 December 2011|title=Banks in the eurozone must raise more than 200bn euros in the first three months of 2012|work=[[The New York Times]]|url=https://www.nytimes.com/2011/12/22/business/global/demand-for-ecb-loans-surpasses-expectations.html|access-date=21 December 2011}}</ref> in the first three months of 2012.

===== "Whatever it takes" (26 July 2012) =====
Facing renewed fears about sovereigns in the eurozone continued Mario Draghi made a decisive speech in London, by declaring that the ECB "...is ready to do '''''whatever it takes''''' to preserve the Euro. And believe me, it will be enough."<ref>{{Cite press release|url=https://www.ecb.europa.eu/press/key/date/2012/html/sp120726.en.html|title=Verbatim of the remarks made by Mario Draghi|website=European Central Bank|language=en|access-date=25 September 2018}}</ref> In light of slow political progress on solving the eurozone crisis, Draghi's statement has been seen as a key turning point in the eurozone crisis, as it was immediately welcomed by European leaders, and led to a steady decline in bond yields for eurozone countries, in particular Spain, Italy and France.<ref>{{Cite news|url=https://www.ft.com/content/93b358ba-c1d4-11e0-bc71-00144feabdc0 |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/93b358ba-c1d4-11e0-bc71-00144feabdc0 |archive-date=10 December 2022 |url-access=subscription|title=Itay and Spain respond to ECB treatment|date=8 August 2011|work=Financial Times|access-date=28 December 2019}}</ref><ref>{{Cite web|date=2012-07-26|title=ECB 'will do whatever it takes' to save the euro|url=https://www.politico.eu/article/ecb-will-do-whatever-it-takes-to-save-the-euro/|access-date=2021-04-03|website=POLITICO|language=en-US}}</ref>

Following up on Draghi's speech, on 6 September 2012 the ECB announced the '''[[Outright Monetary Transactions]]''' programme (OMT).<ref>{{cite news|url=https://www.nytimes.com/2012/09/07/business/global/european-central-bank-leaves-interest-rates-unchanged-at-0-75-percent.html?pagewanted=all|title=Europe's Central Bank Moves Aggressively to Ease Euro Crisis|last1=Ewing|first1=Jack|date=6 September 2012|work=The New York Times|last2=Erlanger|first2=Steven}}</ref> Unlike the previous SMP programme, OMT has no [[ex-ante]] time or size limit.<ref>{{cite press release|url=http://www.ecb.int/press/pressconf/2012/html/is120906.en.html|title=ECB press conference, 6 September 2012|access-date=14 September 2014}}</ref> However, the activation of the purchases remains conditioned to the adherence by the benefitting country to an adjustment programme to the ESM. The program was adopted with near unanimity, the Bundesbank president [[Jens Weidmann]] being the sole member of the ECB's Governing Council to vote against it.<ref>"[…] the decision on Outright Monetary Transactions (OMTs) that we took in September 2012 to protect the euro area from speculation that could have forced some countries out of the single currency. That decision was almost unanimous; the single vote against came from the President of the Bundesbank" {{Cite press release|date=2019-12-16|title=Interview with Libération|url=https://www.ecb.europa.eu/press/inter/date/2019/html/ecb.in191216_1~bb222205e4.en.html|access-date=2021-04-03|website=European Central Bank|language=en}}</ref>

Even if OMT was never actually implemented until today, it made the "Whatever it takes" pledge credible and significantly contributed to stabilizing financial markets and ending the sovereign debt crisis. According to various sources, the OMT programme and "whatever it takes" speeches were made possible because EU leaders previously agreed to build the [[European Banking union|banking union]].<ref>{{Cite web|title=Ministers agree deal on EU banking union|url=https://euobserver.com/economic/118516|access-date=2021-04-03|website=EUobserver|date=13 December 2012 |language=en}}</ref>

=== Low inflation and quantitative easing (2015–2019) ===
In November 2014, the bank moved into its [[Seat of the European Central Bank|new premises]], while the [[Eurotower (Frankfurt am Main)|Eurotower building]] was dedicated to hosting the newly established supervisory activities of the ECB under [[European Banking Supervision]].<ref>{{Cite press release|date=2013-11-09|title=Eurotower to house ECB's banking supervision staff|url=https://www.ecb.europa.eu/press/pr/date/2013/html/pr131109.en.html|access-date=2021-04-03|website=European Central Bank|language=en}}</ref>

Although the sovereign debt crisis was almost solved by 2014, the ECB started to face a repeated decline<ref>{{Cite web|url=https://calrev.org/2019/05/04/on-the-causes-of-european-political-instability/|title=On the Causes of European Political Instability|last=Henderson|first=Isaiah M.|date=4 May 2019|website=The California Review|language=en-US|access-date=19 July 2019}}</ref> in the Eurozone inflation rate, indicating that the economy was going towards a deflation. Responding to this threat, the ECB announced on 4 September 2014 the launch of two bond buying purchases programmes: the Covered Bond Purchasing Programme (CBPP3) and Asset-Backed Securities Programme (ABSPP).<ref>{{Cite press release|url=https://www.ecb.europa.eu/press/pressconf/2014/html/is140904.en.html|title=Introductory statement to the press conference (with Q&A)|website=European Central Bank|language=en|access-date=25 September 2018}}</ref>

==== Asset Purchase programme (APP) ====
On 22 January 2015, the ECB announced an extension of those programmes within a full-fledge "[[quantitative easing]]" programme which also included sovereign bonds, to the tune of 60 billion euros per month up until at least September 2016. The programme was started on 9 March 2015.<ref>{{cite news|date=27 April 2017|title=Draghi fends off German critics and keeps stimulus untouched|newspaper=Financial Times|url=https://www.ft.com/content/efece562-2b30-11e7-bc4b-5528796fe35c |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/efece562-2b30-11e7-bc4b-5528796fe35c |archive-date=10 December 2022 |url-access=subscription |url-status=live}}</ref>

On 8 June 2016, the ECB added corporate bonds to its asset purchases portfolio with the launch of the corporate sector purchase programme (CSPP).<ref>{{Cite web|url=https://www.ecb.europa.eu/ecb/legal/pdf/celex_32016d0016_en_txt.pdf?0240957ff3a5d0b909a9482628799777|title=DECISION (EU) 2016/948 OF THE EUROPEAN CENTRAL BANK of 1 June 2016 on the implementation of the corporate sector purchase programme (ECB/2016/16)|access-date=29 January 2020|archive-date=17 May 2020|archive-url=https://web.archive.org/web/20200517052517/https://www.ecb.europa.eu/ecb/legal/pdf/celex_32016d0016_en_txt.pdf?0240957ff3a5d0b909a9482628799777|url-status=dead}}</ref> Under this programme, it conducted the net purchase of corporate bonds until January 2019 to reach about €177 billion. While the programme was halted for 11 months in January  2019, the ECB restarted net purchases in November 2019.<ref>{{Cite web|url=https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html#cspp|title=Corporate sector purchase programme (CSPP) – Questions & Answers|website=European Central Bank|date=7 December 2021}}</ref>

On May 5, 2020, the Court ordered the [[Bundestag]] and the [[Cabinet of Germany|Bundesregierung]] to ensure the ECB had carried out a proportionality assessment of the vast purchases of government debt in the [[Public Sector Purchase Programme]] (PSPP) to ensure the economic and fiscal policy effects do not outweigh its policy objectives.<ref name="Camous-2020b" /><ref name="Bundesverfassungsgericht-2023">{{Cite web |title=ECB decisions on the Public Sector Purchase Programme exceed EU competences |url=https://www.bundesverfassungsgericht.de/SharedDocs/Pressemitteilungen/EN/2020/bvg20-032.html |access-date=2023-12-20 |website=www.bundesverfassungsgericht.de}}</ref><ref>{{Cite web |last1=Arnold |first1=Martin |last2=Stubbington |first2=Tommy |date=2020-05-05 |title=German court calls on ECB to justify bond-buying programme |url=https://www.ft.com/content/a1beda5e-5c2d-429e-a095-27728ed2d72b |access-date=2023-12-20 |website=Financial Times}}</ref><ref name="Arnold-2020c">{{Cite web |last1=Arnold |first1=Martin |last2=Hall |first2=Ben |date=2020-05-06 |title=German court ruling casts doubt on European monetary policy |url=https://www.ft.com/content/07f19a1b-7494-439d-9765-7fd7ddf09860 |access-date=2023-12-20 |website=Financial Times}}</ref> The PSPP-implementing decision has been considered an act [[ultra vires]] by the ECB as it was too arbitrary and lacks reasoning in ints proportionality assessment.<ref name="Bundesverfassungsgericht-2023" /><ref>{{Cite web |date=2020-05-05 |title=German Constitutional Court rules the Court of Justice's Weiss judgment ultra vires due to poor reasoning and weak standard of review |url=https://eulawlive.com/german-constitutional-court-rules-the-court-of-justices-weiss-judgment-ultra-vires-due-to-poor-reasoning-and-weak-standard-of-review/ |access-date=2023-12-20 |website=EU Law Live |language=en-GB}}</ref><ref>{{Cite journal |last=Smits |first=René |date=2021-04-14 |title=The European Central Bank's Pandemic Bazooka: Mandate Fulfilment in Extraordinary Times |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3824740 |journal=EU Law Live |pages=19 |ssrn=3824740}}</ref> This ruling by the German Constitutional Court comes at a difficult time for the ECB as it was at the time considering expanding the PEPP. The ruling also reflects the mistrust within some parts of Germany in the ECB, which is seen there as an institution that bails out profligate Southern European countries.<ref name="Arnold-2020c" /> Moreover, this ruling also highlights the vital problem on the euro area architecture, as the range of instruments can use to fulfil its mandate remains unclear.<ref name="Camous-2020b" />

{{As of|2021|post=,}} the size of the ECB's quantitative easing programme had reached 2947 billion euros.<ref>{{Cite web |date=2021-03-25 |title=Asset purchase programmes |url=https://www.ecb.europa.eu/mopo/implement/app/html/index.en.html |access-date=2021-04-03 |website=European Central Bank |language=en}}</ref>

==== Long Term Refinancing Operations (LTRO) ====
The long term refinancing operations (LTRO) are regular open market operations providing financing to credit institutions for periods up to four years. They aim at favoring lending conditions to the private sector and more generally stimulating bank lending to the real economy,<ref>{{Cite web |last= |first= |date=2023-11-29 |title=Open market operations |url=https://www.ecb.europa.eu/mopo/implement/omo/html/index.en.html |access-date=2023-12-05 |website=European Central Bank - Eurosystem |language=en}}</ref> thereby fostering growth.

In December 2011 and January 2012, in the aftermath of the [[2008 financial crisis]], the ECB implemented two LTROs, injecting over €1000 billion of liquidity in the Eurozone financial system. They were later criticized for their inability to revive growth and to help truly revive the real economy, despite having stabilized the Eurozone's financial institutions.<ref name="Fontan-2018">{{Cite journal |last=Fontan |first=Clement |date=2018-10-12 |title=Frankfurt's double standard: the politics of the European Central Bank during the Eurozone crisis |url=https://www.tandfonline.com/doi/full/10.1080/09557571.2018.1495692 |journal=Cambridge Review of International Affairs |volume=31 |issue=2 |pages=175 |doi=10.1080/09557571.2018.1495692 |via=Taylor & Francis Online}}</ref> Further, these operations were devoid of monitoring from the ECB regarding the use made of these liquidities<ref name="Fontan-2018" /> and it appeared that banks had significantly used these funds to pursue carry-trade strategies,<ref>{{Cite journal |last1=Acharya |first1=Viral |last2=Steffen |first2=Sascha |date=6 June 2014 |title=The "greatest" carry trade ever? Understanding eurozone bank risks |url= |journal=Journal of Financial Economics |pages=215–236 |doi=10.1016/j.jfineco.2014.11.004 }}</ref> purchasing sovereign bonds with higher rates and corresponding maturity to generate profits, instead of increasing private lending.<ref name="Fontan-2018" /><ref name="Dwyer-2023">{{Cite journal |last1=Dwyer |first1=Gerald P. |last2=Gilevska |first2=Biljana |last3=Nieto |first3=Maria J. |last4=Samartín |first4=Margarita |date=2023-07-01 |title=The effects of the ECB's unconventional monetary policies from 2011 to 2018 on banking assets |journal=Journal of International and Financial Markets, Institutions & Money |volume=87 |issue=87 |pages=4 |doi=10.1016/j.intfin.2023.101800 |doi-access=free }}</ref>

These critics and deficiencies brought the ECB to instigate targeted long term refinancing operations (TLTROs), first in September and later in December 2014.<ref>ECB press release, 18 September 2014.</ref> These complementary programs imposed conditionality on the LTROs.<ref name="Fontan-2018" /> The TLTROs provided low cost financing to participating banks, under the condition that they reached certain targets in terms of lending to firms and households.<ref name="Dwyer-2023" /> The participating banks were thus more incited to lend to the real economy.

A third wave of TLTRO's was announced on 7 March 2019, namely the TLTRO III.<ref>{{Cite web |date=2019-03-07 |title=Monetary Policy Decisions |url=https://www.ecb.europa.eu/press/pr/date/2019/html/ecb.mp190307~7d8a9d2665.en.html |access-date=2023-12-10 |website=European Central Bank - Eurosystem}}</ref> Under TLTRO III, the interest rate was set at -0.5% below the deposit facility rate (DFR), under condition that banks reached a specific lending performance threshold. The TLTRO III programme was successful to stimulate credit growth.<ref name="Barmeier-2023">{{Cite journal |last1=Barmeier |first1=Marcel |last2=Falath |first2=Juraj |last3=Kiššová |first3=Alena |last4=Lojschová |first4=Adriana |date=2023 |title=Impact of TLTRO III on bank lending: The Slovak experience |url=https://nbs.sk/dokument/b6528586-2679-4245-a850-cca84c5a9ca6/stiahnut/?force=false |journal=National Bank of Slovakia Working Papers |issue=2/2023 |pages=4 |via=National Bank of Slovakia}}</ref><ref>{{Cite journal |last1=Silva |first1=Emilie Da |last2=Grossmann-Wirth |first2=Vincent |last3=Nguyen |first3=Benoit |last4=Vari |first4=Miklos |date=2021 |title=Paying Banks to Lend? Evidence from the Eurosystem's TLTRO and the Euro Area Credit Registry |url=https://ideas.repec.org//p/bfr/banfra/848.html |journal=Working Papers |language=en}}</ref>

=== Christine Lagarde's era (2019 – ) ===
In July 2019, EU leaders nominated [[Christine Lagarde]] to replace Mario Draghi as ECB President. Lagarde resigned from her position as managing director of the [[International Monetary Fund]] in July 2019<ref>{{Cite news|date=2019-07-16|title=Christine Lagarde resigns as head of IMF|language=en-GB|work=BBC News|url=https://www.bbc.com/news/business-49009226|access-date=2021-04-03}}</ref> and formally took over the ECB's presidency on 1 November 2019.<ref>{{Cite news|last1=Hujer|first1=Marc|last2=Sauga|first2=Michael|date=30 October 2019|title=Elegance and Toughness: Christine Lagarde Brings a New Style to the ECB|work=Spiegel Online|url=https://www.spiegel.de/international/europe/christine-lagarde-takes-over-at-the-european-central-bank-a-1294033.html|access-date=11 November 2019}}</ref>

Lagarde immediately signalled a change of style in the ECB's leadership. She embarked the ECB on a strategic review of the ECB's monetary policy strategy, an exercise the ECB had not done for 17 years. As part of this exercise, Lagarde committed the ECB to look into how monetary policy could contribute to [[climate change mitigation|address climate change]],<ref>{{Cite web|date=2019-08-29|title=Lagarde promises to paint the ECB green|url=https://www.politico.eu/article/christine-lagarde-promises-to-paint-the-ecb-green-european-central-bank/|access-date=2021-04-03|website=POLITICO|language=en-US}}</ref> and promised that "no stone would be left unturned." The ECB president also adopted a change of communication style, in particular in her use of social media to promote gender equality,<ref>{{Cite web|date=2021-03-05|title=Christine Lagarde's uphill battle for ECB gender equality|url=https://www.politico.eu/article/christine-lagarde-ecb-gender-equality/|access-date=2021-04-03|website=POLITICO|language=en-US}}</ref> and by opening dialogue with civil society stakeholders.<ref>{{Cite web|date=2019-12-04|title=Christine Lagarde meets with Positive Money Europe|url=https://www.positivemoney.eu/2019/12/meeting-ecb-president-christine-lagarde/|access-date=2021-04-03|website=Positive Money Europe|language=en-GB}}</ref><ref>{{Cite news|date=2020-10-21|title=Lagarde turns to civil society in ECB transformation effort|language=en|work=Reuters|url=https://www.reuters.com/article/us-ecb-lagarde-idUKKBN276166|access-date=2021-04-03}}</ref>

==== The ECB's response to COVID-19 pandemic ====
The onset of the [[COVID-19 pandemic]] precipitated an unprecedented crisis, profoundly impacting global public health, economies, and societal structures on an unparalleled scale. The crisis led to renewed tensions in European sovereign bonds markets, marked by a growing spreads between the interest rates paid by Eurozone member states,<ref name="Runkel-2022">{{Cite journal |last=Runkel |first=Corey N |date=2022-07-15 |title=Eurozone: Pandemic Emergency Purchase Program |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4175432 |journal=Journal of Financial Crises |volume=4 |issue=2 |pages=1570–1580 |ssrn=4175432 |via=SSRN}}</ref> which spurred important concerns that the Eurozone couild be headed towards a new [[European debt crisis|sovereign debt crisis]].

On 12 March 2020, the ECB announced a set of policy measures such as an additional package of net asset purchases of €120 billion by the end of 2020 under the already existing APP, and more favorable terms on the TLTRO III. During the press conference, Christine Lagarde declared that the ECB "[...] is not here to close spreads."<ref name="Tesche-2022b" /><ref name="Lagarde-2020c">{{Cite journal |last=Lagarde |first=Christine |date=2020-03-12 |title=Press conferenece |url=https://www.ecb.europa.eu/press/pressconf/2020/html/ecb.is200312~f857a21b6c.en.html |access-date=2023-12-06 |website=EUropean Central Bank - Eurosystem}}</ref><ref name="Balmer-2020b">{{Cite news |last1=Balmer |first1=Crispian |last2=Mackenzie |first2=James |date=2020-03-12 |title=Italy furious at ECB's Lagarde 'not here to close spreads' comment |url=https://www.reuters.com/article/us-ecb-policy-italy-minister/italy-furious-at-ecbs-lagarde-not-here-to-close-spreads-comment-idUSKBN20Z3DW/ |access-date=2023-12-07 |work=Reuters}}</ref> This particular statement triggered a sudden negative reaction on financial markets, with a widening of yield spreads in Spain, Italy and Greece.<ref name="Moessner-2022">{{Cite journal |last1=Moessner |first1=Richhild |last2=de Haan |first2=Jakob |date=2022 |title=Effects of monetary policy announcements on term premia in the euro area during the COVID-19 pandemic |journal=Financial Research Letters |volume=44 |issue=44 |pages=1–4 |doi=10.1016/j.frl.2021.102055 |pmc=9014297 |pmid=35463215}}</ref>

===== Pandemic Emergency Purchase Programme (PEPP) =====
On 19 March 2020—less than one week after Lagarde's unfortunate statements on the spreads—the ECB announced by surprise the launch of the Pandemic Emergency Purchase Programme (PEPP) worth €750 billion to boost liquidity in the European economy and to contain any sharp increases in sovereign yield spreads.<ref name="Sciorilli Borrelli-2020c">{{Cite web |last=Sciorilli Borrelli |first=Silvia |date=2020-03-19 |title=ECB rises to expectations with massive bond-buying move |url=https://www.politico.eu/article/the-ecb-rises-up-to-expectations-launches-massive-bond-buying-program/ |access-date=2023-12-06 |website=POLITICO |language=en}}</ref><ref>{{Cite journal |date=2020-03-18 |title=ECB announces €750 billion Pandemic Emergency Purchase Programme (PEPP) |url=https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200318_1~3949d6f266.en.html#:~:text=The%20ECB%20will%20not%20tolerate,jurisdictions%20of%20the%20euro%20area. |access-date=2023-12-07 |website=European Central Bank - Eurosystem}}</ref> This announcement led to an immediate reboot in stock prices<ref name="Moessner-2022" /><ref name="Ortmans-2021">{{Cite journal |last1=Ortmans |first1=Aymeric |last2=Tripier |first2=Fabien |date=2021-06-09 |title=COVID-induced sovereign risk in the euro area: When did the ECB stop the spread? |journal=European Economic Review |volume=137 |issue=137 |pages=2–3 |doi=10.1016/j.euroecorev.2021.103809 |pmc=9750059 |pmid=36536819}}</ref><ref name="Benigno-2022">{{Cite journal |last1=Benigno |first1=Pierpaolo |last2=Canofari |first2=Paolo |last3=Di Bartolomeo |first3=Giovanni |last4=Messori |first4=Marcello |date=2022-07-16 |title=The ECB'sasset purchase programme: Theory, effects, and risks |url=https://onlinelibrary.wiley.com/doi/full/10.1111/joes.12521 |journal=Journal of Economic Surveys |volume=37 |issue=3 |pages=893–902 |doi=10.1111/joes.12521 |s2cid=250636847 |via=Wiley Online Library |hdl-access=free |hdl=10067/1896580151162165141}}</ref> and came one day after the spike of sovereign risk spreads.<ref name="Alberola-2022">{{Cite journal |last1=Alberola |first1=Enrique |last2=Cheng |first2=Gong |last3=Consiglio |first3=Andrea |last4=Zenios |first4=Stavros A. |date=2022-07-19 |title=Debt sustainability and monetary policy: the case of ECB asset purchases |url=https://www.bis.org/publ/work1034.htm |journal=BIS Working Papers |volume= |issue=1034 |pages=3–4}}</ref>

The PEPP was designed as a typical "[[quantitative easing]]" policy, under which the ECB is able to purchase securities from the private and public sector in a flexible manner.<ref name="Arnold-2020d">{{Cite web |last=Arnold |first=Martin |date=2020-06-04 |title=ECB boosts bond-buying stimulus package by €600bn |url=https://www.ft.com/content/c59ab92d-e614-4284-a028-46ee3bcf92f9 |access-date=2023-12-05 |website=Financial Times}}</ref><ref name="Tesche-2022b">{{Cite journal |last=Tesche |first=Tobias |date=2022-02-16 |title=Pandemic Politics: The European Union in Times of the Coronavirus Emergency |url=https://onlinelibrary.wiley.com/doi/10.1111/jcms.13303 |journal=Journal of Common Market Studies |volume=60 |issue=2 |pages=485–486 |doi=10.1111/jcms.13303 |s2cid=245528815 |via=Wiley Online Library}}</ref><ref name="Bertoldi-2023c">{{Cite journal |last1=Bertoldi |first1=Moreno |last2=Eriksgård |first2=Annika |last3=Orsini |first3=Kristian |last4=Pfeiffer |first4=Philipp |date=2023-07-28 |title=Where is the EU economy headed? The international dimension |url=https://www.sciencedirect.com/science/article/pii/S0161893823000728 |journal=Journal of Policy Modeling |volume=45 |issue=4 |pages=819–821 |doi=10.1016/j.jpolmod.2023.07.005 |s2cid=260307969 |via=Elsevier Science Direct}}</ref> The purpose of the PEPP was to stabilize sovereign bonds yields to low and stable levels, thus preventing self-fulfilling panics in financial markets as was the case during the [[European debt crisis]].<ref name="Tesche-2020a">{{Cite journal |last=Tesche |first=Tobias |date=2020-06-15 |title=The European Union's response to the coronavirus emergency: an early assessment |url=https://www.lse.ac.uk/european-institute/Assets/Documents/LEQS-Discussion-Papers/LEQSPaper157.pdf |journal=LSE 'Europe in Question' Discussion Paper Series |volume=157/2020 |pages=1–5 |via=SSRN}}</ref><ref name="Carnazza-2021">{{Cite journal |last1=Carnazza |first1=Giovanni |last2=Liberati |first2=Paolo |date=2021-04-10 |title=The asymmetric impact of the pandemic crisis on interest rates on public debt in the Eurozone |url=https://www.sciencedirect.com/science/article/pii/S0161893821000223/pdfft?md5=d558e4e98a05a43cda259897b42525c9&pid=1-s2.0-S0161893821000223-main.pdf |journal=Journal of Policy Modeling |volume=43 |issue=3 |pages=522–541 |doi=10.1016/j.jpolmod.2021.04.001 |s2cid=234834111 |via=Elsevier Science Direct}}</ref>

The PEPP was established as a separate purchase programme alongside the pre-existing Asset Purchase Programme (APP) with the sole purpose to respond to the economic and financial consequences of the COVID-19 crisis, and in particular prevent market fragmentations.<ref name="DB-2023">{{Cite web |title=Pandemic emergency purchase programme (PEPP) |url=https://www.bundesbank.de/en/tasks/monetary-policy/outright-transactions/pandemic-emergency-purchase-programme-pepp--831136 |access-date=2023-11-30 |website=Deutsche Bundesbank Eurosystem}}</ref><ref name="Grund-2020">{{Cite journal |last=Grund |first=Sebastian |date=2020-03-25 |title=Legal, Compliant and Suitable: The ECB's Pandemic Emergency Purchase Programme (PEPP) |url=https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=13475&context=ypfs-documents |journal=Hertie School Jacques Delors Centre |pages=1–3 |via=Elischolar}}</ref> While very similar, Contrary to the APP, the ECB decided to allow itself to deviate from the capital key. This temporal flexibility from the capital key meant that the ECB could more effectively prevent the rise of Italian and Spanish yield spreads.<ref name="Tesche-2020a" /><ref name="Borri-2021">{{Cite journal |last1=Borri |first1=Nicola |last2=di Giorgio |first2=Giorgio |date=6 February 2021 |title=Systemic risk and the COVID challenge in the european banking sector |url=https://www.sciencedirect.com/science/article/pii/S0378426621000315/pdf |journal=Journal of Banking and Finance |volume=140 |pages=9–12 |via=Elsevier Science Direct}}</ref><ref name="Blotevogel-2023">{{Cite journal |last1=Blotevogel |first1=Robert |last2=Hudecz |first2=Robert |last3=Vangelista |first3=Elisabetta |date=2024 |title=Asset purchases and sovereign bond spreads in the euro area during the pandemic |url=https://www.sciencedirect.com/science/article/pii/S0261560623001791 |journal=Journal of International Money and Finance |volume=140 |issue= |pages=1–8 |doi=10.1016/j.jimonfin.2023.102978 |access-date= |via=Elsevier Science Direct}}</ref><ref>{{Citation |title=Decision (EU) 2020/440 of the European Central Bank of 24 March 2020 on a temporary pandemic emergency purchase programme (ECB/2020/17) |date=2020-03-24 |url=http://data.europa.eu/eli/dec/2020/440/oj/eng |access-date=2023-11-30 |language=en}}</ref><ref name="Camous-2020b">{{Cite journal |last1=Camous |first1=Antoine |last2=Claeys |first2=Grégory |date=2020-10-26 |title=The evolution of European economic institutions during the COVID-19 crisis |journal=European Policy Analysis |volume=6 |issue=2 |pages=334–336 |doi=10.1002/epa2.1100 |pmid=34616911 |pmc=7753405 }}</ref><ref>{{Cite journal |last=Fabbrini |first=Federico |date=2022 |title=The Legal Architecture of the Economic Responses to COVID-19: EMU beyond the Pandemic |journal=Journal of Common Market Studies |volume=60 |issue=1 |pages=190 |doi=10.1111/jcms.13271 |doi-access=free }}</ref>

Assets meeting the eligibility criteria of the APP were also eligible under the PEPP.<ref name="Bank-2023">{{Cite journal |date=2023-08-09 |title=FAQ on the pandemic emergency purchase programme |url=https://www.ecb.europa.eu/mopo/implement/pepp/html/ecb.faq_pepp.en.html |access-date=2023-11-30 |website=European Central Bank - Eurosystem}}</ref> However, the pool of assets eligible under the PEPP was broader than the usual ECB collateral eligibility framework.<ref name="Sciorilli Borrelli-2020c" /> For instance, greek sovereign bonds could be purchased by the ECB under this programme, despite having a credit ratings below the usual investment grade requirement.<ref name="Sciorilli Borrelli-2020c" /><ref name="FT-2023b">{{Cite web |title=ECB set to expand bond-buying to soak up debt |url=https://www.ft.com/content/3cf499f7-9c17-46c6-bedd-8893f2d56cf7 |access-date=2023-12-07 |website=Financial Times}}</ref><ref name="Arnold-2020e">{{Cite web |last=Arnold |first=Martin |date=2020-03-19 |title=ECB to launch €750bn bond-buying programme |url=https://www.ft.com/content/711c5df2-695e-11ea-800d-da70cff6e4d3 |access-date=2023-12-04 |website=Financial Times}}</ref> This waiver was given based on several considerations from the ECB: there was a need to alleviate the pressures stemming from the pandemic on the Greek financial markets; Greece was already and would be closely monitored by giving the waiver; and Greece regained market access.<ref name="Boninghausen-2022b">{{cite journal |last1=Böninghausen |first1=Benjamin |last2=Fernández Brennan |first2=León |last3=McCabe |first3=Laura |last4=Schumacher |first4=Julian |title=The pandemic emergency purchase programme – an initial review |journal=ECB Economic Bulletin |issue=8/2022 |page=97 & 98}}</ref> Non-financial commercial paper with a remaining maturity of at least 28 days were also eligible for purchase under the PEPP.<ref name="Bank-2023" /><ref>{{Cite web |last=Ondernemen |first=Agentschap Innoveren & |title=EU Funding Overview |url=https://eufundingoverview.be/ |access-date=2023-11-30 |website=eufundingoverview.be |language=en}}</ref>

On 4 June 2020, the ECB announced<ref>{{Cite journal |date=2020-06-04 |title=Monetary policy decisions |url=https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.mp200604~a307d3429c.en.html |access-date=2023-12-07 |website=European Central Bank - Eurosystem}}</ref> it would expand the PEPP by another €600 billion,<ref name="Pinto-2023">{{Cite journal |last1=Pinto |first1=João |last2=Costa |first2=Tiago |date=2023-09-26 |title=The Impact of the ECB's PEPP on Euro Area Bond Spreads |url=https://repositorio.ual.pt/bitstream/11144/6572/3/The%20Impact%20of%20the%20ECB%C3%94%C3%87%C3%96s%20PEPP%20on%20Euro%20Area%20Bond%20Spreads_ERBE_II_2.pdf |journal=European Review of Business Economics |volume=11 |issue=2 |pages=62–63 |via=Social Science Research Network}}</ref> as it became clear that the pandemic would continue to harm European economies.<ref name="Runkel-2022" /><ref name="Arnold-2020d" /><ref name="Benigno-2022" /><ref name="Moessner-2022" /> Half a year later, on 10 December 2020, the ECB announced its final expansion of the PEPP worth another €500 billion, totalling the final PEPP to €1.850 trillion,<ref name="Bank-2020a">{{Cite journal |date=2020-12-10 |title=Monetary policy decisions |url=https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.mp201210~8c2778b843.en.html |access-date=2023-12-07 |website=European Central Bank - Eurosystem}}</ref><ref name="DB-2023" /><ref name="Alberola-2022" /> corresponding to 15.4% of the euro-area GDP of 2019.<ref name="Wieland-2023">{{Cite journal |last=Wieland |first=Volker |date=2023-07-13 |title=Discussion of "policy packages and policy space: Lessons from COVID-19" by Bergant & Forbes |url=https://www.sciencedirect.com/science/article/pii/S0014292123001654 |journal=European Economic Review |volume=158 |issue=158 |pages=7 |doi=10.1016/j.euroecorev.2023.104536 |s2cid=259942585 |via=Elsevier Science Direct}}</ref>
[[File:PEPP_Graph_Improved.png|thumb|Gross securities purchases by the ECB under the PEPP<ref name="ECB-2023">{{Cite web |date=2023-10-05 |title=Breakdown of cumulative net purchases under the PEPP |url=https://www.ecb.europa.eu/mopo/pdf/PEPP_breakdown_history.csv?6fd58bd8812b585a58b751aebd9a1e4f |access-date=2023-11-10 |website=European Central Bank - Eurosystem}}</ref>]]
In December 2021 the ECB announced that it would discontinue net purchases under the PEPP as from the end of March 2022 and that it intended to reinvest the principal payments from maturing securities at least until the end of 2024.<ref name="Wellink-2023d">{{Cite journal |last=Wellink |first=Nout |date=2023-08-02 |title=Crises have shaped the European Central Bank |journal=Journal of International Money and Finance |volume=138 |pages=7–8 |doi=10.1016/j.jimonfin.2023.102923 |doi-access=free}}</ref><ref>{{Cite journal |date=2020-12-16 |title=Monetary Policy Decisions |url=https://www.ecb.europa.eu/press/pr/date/2021/html/ecb.mp211216~1b6d3a1fd8.en.html |access-date=2023-12-07 |website=European Central Bank - Eurosystems}}</ref>

On 31 March 2022, at the end of the net purchases, the net purchases amounted to €1.718 billion, of which €1.665 billion is invested in public sector securities and €52 billion in private sector securities.<ref name="Boninghausen-2022a">{{cite journal |last1=Böninghausen |first1=Benjamin |last2=Fernández Brennan |first2=León |last3=McCabe |first3=Laura |last4=Schumacher |first4=Julian |title=The pandemic emergency purchase programme – an initial review |journal=ECB Economic Bulletin |issue=8/2022 |pages=93–104}}</ref> Of the total €1.850 billion available under the PEPP, 93% of the full envelope wase used, due to indications of decreased financial stress in the Euro Area, mainly thanks to relaxation of COVID restrictions and the reopening of European markets.<ref>{{Cite journal |last1=Birkholz |first1=Carlo |last2=Heinemann |first2=Friedrich |date=2022-06-09 |title=Magnitudes and capital key divergence of the Eurosystem's PSPP/PEPP purchases – updated june 2022 |url=https://www.econstor.eu/bitstream/10419/271651/1/zew-exp202205.pdf |journal=ZEW Expert Brief |issue=5 |pages=5 |via=econstor.eu}}</ref>
{| class="wikitable"
|+Cumulative PEPP purchases in million euros<ref name="ECB-2023" />
!
!Private sector
securities
!Public sector
securities
!Total
securities
!Additional PEPP commitment
by ECB
!Total PEPP
commitment by the ECB
|-
|Mar-May 2020
|           48,062.00
|              186,603.00
|              234,665.00
|              750,000.00
|                    750,000.00
|-
|Jun-Jul
|           55,592.00
|              384,817.00
|              440,409.00
|              600,000.00
|                 1,350,000.00
|-
|Aug-Sep
|           55,534.00
|              511,649.00
|              567,183.00
|                            -  
|                 1,350,000.00
|-
|Oct-Nov
|           48,194.00
|              651,809.00
|              700,003.00
|                            -  
|                 1,350,000.00
|-
|Dec-Jan 2021
|           42,064.00
|              768,148.00
|              810,212.00
|              500,000.00
|                 1,850,000.00
|-
|Feb-Mar
|           43,916.00
|              899,731.00
|              943,647.00
|                            -  
|                 1,850,000.00
|-
|Apr-May
|           39,696.00
|           1,064,769.00
|           1,104,465.00
|                            -  
|                 1,850,000.00
|-
|Jun-Jul
|           42,989.00
|           1,229,199.00
|           1,272,189.00
|                            -  
|                 1,850,000.00
|-
|Aug-Sep
|           46,640.00
|           1,365,650.00
|           1,412,290.00
|                            -  
|                 1,850,000.00
|-
|Oct-Nov
|           50,089.00
|           1,498,100.00
|           1,548,189.00
|                            -  
|                 1,850,000.00
|-
|Dec-Jan 2022
|           50,384.00
|           1,597,293.00
|           1,647,677.00
|                            -  
|                 1,850,000.00
|-
|Feb-Mar
|           52,439.00
|           1,665,635.00
|           1,718,075.00
|                            -  
|                 1,850,000.00
|-
|Apr-May
|           52,441.00
|           1,665,618.00
|           1,718,061.00
|                            -  
|                 1,850,000.00
|-
|Jun-Jul
|           52,437.00
|           1,664,913.00
|           1,717,352.00
|                            -  
|                 1,850,000.00
|-
|Aug-Sep
|           52,440.00
|           1,660,593.00
|           1,713,035.00
|                            -  
|                 1,850,000.00
|-
|Oct-Nov
|           52,440.00
|           1,660,312.00
|           1,712,753.00
|                            -  
|                 1,850,000.00
|-
|Dec-Jan 2023
|           52,440.00
|           1,661,204.00
|           1,713,645.00
|                            -  
|                 1,850,000.00
|-
|Feb-Mar
|           52,440.00
|           1,661,077.00
|           1,713,518.00
|                            -  
|                 1,850,000.00
|-
|Apr-May
|           52,393.00
|           1,660,634.00
|           1,713,028.00
|                            -  
|                 1,850,000.00
|-
|Jun-Jul
|           52,443.00
|           1,660,307.00
|           1,712,752.00
|                            -  
|                 1,850,000.00
|-
|Aug-Sep
|           52,464.00
|           1,659,969.00
|           1,712,435.00
|                            -  
|                 1,850,000.00
|}

==== Criticism against PEPP ====
Overall, the PEPP programme was widely welcomed by market participants and European policy makers. However in March 2021, a group of German economists and lawyers filed a lawsuit against the PEPP at the [[Federal Constitutional Court|German Federal Constitutional Court]].<ref name="Tesche-2022b" /><ref name="Wellink-2023d" />

===== New TLTRO III and PELTROs =====
On 30 April 2020, the ECB Governing council introduced additional measures to support the economy during the Covid19 pandemic, including PELTROs and new modalities for the TLTROs.

First, the ECB made several adjustments to the framework of its TLTRO III.<ref name="Bank-2020c">{{Cite journal |date=2020-04-30 |title=ECB announces new pandemic emergency longer-term refinancing operations |url=https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200430_1~477f400e39.en.html |access-date=2023-12-07 |website=European Central Bank - Eurosystem}}</ref> A key change was that the ECB also reduced the interest rate applied to these open market operations to a rate going as low as -1% for the banks meeting the lending threshold of 0%.<ref name="Bank-2020c" /> With the TLTRO III, the participating banks were thus enabled to borrow at lower interest rates than those paid on their excess reserve.<ref name="Castillo Lozoya-2022">{{Cite journal |last1=Castillo Lozoya |first1=M. Carmen |last2=García-Escudero |first2=Enrique Esteban |last3=Pérez Ortiz |first3=Maria Luisa |date=2022-04-07 |title=The Effect of TLTRO III on Spanish Credit Institutions' Balance Sheets |url=https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4101166 |journal=Banco de España |issue=9/22 |pages=3–8 |ssrn=4101166 |via=Social Science Research Network}}</ref>  Another key change was thet ECB's decision to expand bank's borrowing allowance under TLTRO III from 30% to 50%, then up to 55% of their portfolio of loans to firms and households.<ref name="ReferenceA">ECB press release, 10 December 2020.</ref>

Second, the ECB introduced pandemic emergency long-term refinancing operations (PELTROs).<ref name="ECB press release, 30 April 2020">ECB press release, 30 April 2020.</ref> The market operations are similar to the TLTRO III, but are conduced in a more fequent basis in order to ensure smooth liquidity provision to the market.

During the pandemic, these monetary responses proved essential. In their absence, a credit crunch would normally have taken place. Indeed, increase in demand traditionally translates in a rise of borrowing costs.<ref name="Altavilla-2023">{{Cite journal |last1=Altavilla |first1=Carlo |last2=Barbiero |first2=Francesca |last3=Boucinha |first3=Miguel |last4=Burlon |first4=Lorenzo |date=2023-05-13 |title=The Great Lockdown: Pandemic response policies and bank lending conditions |url=https://www.sciencedirect.com/science/article/pii/S0014292123001071 |journal=European Economic Review |volume=156 |pages=6–14 |doi=10.1016/j.euroecorev.2023.104478 |via=Elsevier Science Direct}}</ref> Reports from various member states central banks on the matter indicate that loans supply by participating banks has indeed expanded, in line with the ECB policy.<ref name="Barmeier-2023" /><ref name="Castillo Lozoya-2022" /><ref>{{Cite journal |last1=Kwapil |first1=Claudia |last2=Rieder |first2=Kilian |date=2021-03-11 |title=The effects of the monetary policy response to the COVID-19 pandemic: preliminary evidence from a pilot study using Austrian bank-level data |url=https://www.oenb.at/en/Publications/Economics/Monetary-Policy-and-the-Economy/2021/monetary-policy-and-the-economy-q4-20-q1-21.html |journal=Monetary Policy and the Economy Q4/20-Q1/21 |pages=134 |via=Oesterreichische Nationalbank}}</ref> Accordingly, thorough academic studies have confirmed the actual enhancement of financing conditions and the avoidance of credit scarcity.<ref name="Altavilla-2023" /><ref>{{Cite journal |last1=Dwyer |first1=Gerald |last2=Gilevska |first2=Biljana |last3=Nieto |first3=Maria |last4=Samartín |first4=Margarita |date=1 July 2023 |title=The effects of the ECB's unconventional monetary policies from 2011 to 2018 on banking assets. |url=|journal=Journal of International Financial Markets |pages=28 |doi=10.1016/j.intfin.2023.101800 |doi-access=free }}</ref> In fact, the credit to firms attained unprecedented levels when from March to May 2020, it increased by €250 billion on aggregate.<ref name="Altavilla-2023" /> Furthermore, analysts observed  that even non-participating banks (to the TLTROs and PELTROs) benefited from it in parallel manners.

==== Transmission Protection instrument (TPI) ====
The Transmission Protection Instrument (TPI) is a tool the ECB could use to ensure monetary policy decisions are smoothly transmitted across all euro area countries, introduced on July 21, 2022.<ref name="Bertoldi-2023c"/><ref name="Broeders-2023c">{{Cite journal |last1=Broeders |first1=Dirk |last2=de Haan |first2=Leo |last3=van den End |first3=Jan Willem |date=2023-06-10 |title=How quantitative easing changes the nature of sovereign risk |url=https://www.sciencedirect.com/science/article/pii/S0261560623000827 |journal=Journal of International Money and Finance |volume=137 |pages=3–11 |doi=10.1016/j.jimonfin.2023.102881 |s2cid=259541844 |via=Elsevier Science Direct |hdl-access=free |hdl=1871.1/6bab4cb8-1f5e-4670-8381-374e6a8ed3f3}}</ref><ref name="Arnold-2023c">{{Cite journal |last=Arnold |first=Ivo J.M. |date=2023-09-26 |title=Teaching economics of monetary union with the IS-MP-PC model |url=https://www.sciencedirect.com/science/article/pii/S1477388023000178 |journal=International Review of Economics Education |volume=44 |pages=4–9 |doi=10.1016/j.iree.2023.100276 |via=Elsevier Science Direct}}</ref><ref name="Bank-2022">{{Cite journal |date=2022-07-21 |title=The Transmission Protection Instrument |url=https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.pr220721~973e6e7273.en.html |access-date=2023-12-19 |website=European Central Bank - Eurosystem |last1=Bank |first1=European Central }}</ref><ref name="Lengwiler-2023">{{Cite journal |last1=Lengwiler |first1=Yvan |last2=Orphanides |first2=Athanasios |date=2023-03-21 |title=Collateral Framework: Liquidity Premia and Multiple Equilibria |url=https://onlinelibrary.wiley.com/doi/epdf/10.1111/jmcb.13048 |journal=Journal of Money, Credit and Banking |volume=56 |issue=2–3 |pages=20–21 |doi=10.1111/jmcb.13048 |via=Wiley Online Library|hdl=10419/233209 |hdl-access=free }}</ref> Under the TPI, the ECB would be able to purchase securities in the secondary market, to counter against "unwanted, disorderly market dynamics", self fulfilling crises market expectations that do not reflect reality,<ref name="Sandbu-2022">{{Cite web |last=Sandbu |first=Martin |date=2022-07-21 |title=The ECB reminds everyone who really has the authority |url=https://www.ft.com/content/3f1e6cb3-1a63-412e-bb1f-a8624760fd86 |access-date=2023-12-19 |website=Financial Times}}</ref><ref name="Callegari-2023">{{Cite journal |last1=Callegari |first1=Giovanni |last2=Marimon |first2=Ramon |last3=Wicht |first3=Adrien |last4=Zavalloni |first4=Luca |date=2023-08-05 |title=On a lender of last resort with a central bank and a stability Fund |journal=Review of Economic Dynamics |volume=50 |pages=118 |doi=10.1016/j.red.2023.07.012 |doi-access=free |hdl=10230/59232 |hdl-access=free }}</ref><ref name="Spendzharova-2023">{{Cite journal |last=Spendzharova |first=Aneta |date=2023-08-29 |title=Gouvernement Économique, but Not Like in the 1990s: The Commission and the ECB's Policies Advancing the 'Green Transition' |journal=Journal of Common Market Studies |volume=61 |pages=143 |doi=10.1111/jcms.13541 |doi-access=free }}</ref> thus not justified by "country specific fundamentals."<ref name="Arnold-2023c"/><ref name="Wellink-2023d"/><ref name="Bank-2022" /><ref name="Peychev-2022">{{Cite journal |last=Peychev |first=Anna |date=2022-11-09 |title=Disorder and Discipline: The ECB's Transmission Protection Instrument |url=https://www.europeanpapers.eu/en/europeanforum/disorder-discipline-ecb-transmission-protection-instrument |journal=European Papers |volume=7 |issue=2 |pages=739–747 }}</ref><ref name="Arnold-2022">{{Cite web |last=Arnold |first=Martin |date=2022-07-21 |title=Spread betting: how will the ECB's new bond-buying tool work? |url=https://www.ft.com/content/c5499acd-0271-458d-8363-9e75633399ee |access-date=2023-12-19 |website=Financial Times}}</ref><ref name="FT-2022">{{Cite web |date=2022-07-22 |title=The ECB arms itself against bond market pessimism |url=https://www.ft.com/content/aed7b9f8-87d3-4da4-83af-a476a8c2b850 |access-date=2023-12-19 |website=www.ft.com}}</ref> The TPI thus enables the ECB to control the difference between borrowing costs across the euro area, thereby reducing fragmentation risk across the euro area.<ref name="Broeders-2023c"/><ref name="Arnold-2023c"/><ref name="Sandbu-2022" /><ref name="FT-2022" /><ref name="Grimm-2023">{{Cite journal |last1=Grimm |first1=Veronika |last2=Nöh |first2=Lukas |last3=Wieland |first3=Volker |date=2023-05-31 |title=Government bond rates and interest expenditure of large euro area member states: A scenario analysis |url=https://onlinelibrary.wiley.com/doi/epdf/10.1111/infi.12434 |journal=International Finance |volume=26 |issue=3 |pages=297 |doi=10.1111/infi.12434 |via=Wiley Online Library|hdl=10419/261487 |hdl-access=free }}</ref><ref name="Koranyi-2022">{{Cite news |last1=Koranyi |first1=Balazs |last2=John |first2=Mark |date=2022-07-21 |title=ECB unveils new TPI anti-fragmentation instrument |url=https://www.reuters.com/markets/europe/ecb-unveils-new-tpi-anti-fragmentation-instrument-2022-07-21/ |access-date=2023-12-20 |work=Reuters}}</ref> By not letting interfere market dynamics that do not reflect economic reality, the ECB fulfils its secondary mandate under the TFEU, namely "to support the general economic policies of the Union."<ref name="Arnold-2023c"/><ref name="Sandbu-2022" /> Although PEPP would remain the first line of defence to counter for transmission risks,<ref name="Wellink-2023d"/><ref name="Peychev-2022" /> the TPI should be seen as an addition to the ECB's toolkit.<ref name="Bank-2022" />

===== Eligible securities under the TPI =====
Contrary to the PEPP and the APP, the TPI does not have an ''ex ante'' upper limit on the purchase of securities.<ref name="Bank-2022" /><ref name="Spendzharova-2023" /><ref name="Arnold-2022" /><ref name="Grimm-2023" /><ref>{{Cite web |last1=Arnold |first1=Martin |last2=Johnston |first2=Ian |date=2021-07-21 |title=ECB raises rates for first time in more than a decade |url=https://www.ft.com/content/42b002c0-434e-4688-bdb7-33e0a7c2323f |access-date=2023-12-19 |website=Financial Times}}</ref> Although the ECB has stated it would primarily buy only government bonds on the secondary market<ref name="Spendzharova-2023" /> maturing between 1 and 10 years,<ref name="Arnold-2022" /> the bonds purchased fall under the complete discretion of the ECB and does not necessarily follow the capital key, and private securities could be considered as well.<ref name="Bank-2022" /><ref name="FT-2022" /><ref>{{Cite web |last=Treeck |first=Johanna |date=2023-05-05 |title=ECB needs a new type of bazooka to battle Baltic risk |url=https://www.politico.eu/article/ecb-needs-a-new-type-of-bazooka-to-battle-baltic-risk/ |access-date=2023-12-20 |website=POLITICO |language=en}}</ref> However, there are four conditions that need to be met before securities are eligible for purchasing under TPI:<ref name="Grimm-2023" />

# Compliance with the fiscal framework of the EU and not be involved in the [[Stability and Growth Pact|excessive deficit procedure]];
# Absence of macroeconomic imbalances and not being involved in an excessive [[Macroeconomic Imbalance Procedure|macroeconomic imbalance procedure]], demonstrating that it is in compliance with the commission's recommendations;
# Sovereign debt trajectory must be sustainable, assessed by the ECB and other relevant bodies;
# Stick to commitments made under the Recovery and Resilience Facility, proving that the government follows sound and sustainable macroeconomic policies.<ref name="Bank-2022" /><ref name="Peychev-2022" /><ref name="Arnold-2022" /><ref name="Koranyi-2022" /><ref name="POLITICO-2022b">{{Cite web |date=2022-07-21 |title=ECB lifts rates for first time in more than a decade |url=https://www.politico.eu/article/ecb-delivers-50-basis-point-rate-hike-adds-tool-to-its-box/ |access-date=2023-12-20 |website=POLITICO |language=en}}</ref>

The conditions for government bonds to be eligible under the TPI draw heavily on the macroeconomic governance, and making sure that politicians do not take decisions that facilitate speculation.<ref name="Sandbu-2022" /><ref name="Martin-2022b">{{Cite web |last=Martin |first=Katie |date=2022-07-22 |title=Markets will test the ECB's resolve |url=https://www.ft.com/content/a9851c45-f2bb-4e00-9a8a-000038308f0e |access-date=2023-12-20 |website=Financial Times}}</ref> The decision by the ECB to support a country by using the TPI will depend on the severity of the risks a country faces.<ref name="Arnold-2022" /><ref name="POLITICO-2022b"/> Government debt should thus be sustainable to be eligible for TPI purchases.<ref name="Callegari-2023" /><ref name="FT-2022" />

If the aforementioned conditions are met, the ECB could decide to activate the TPI.<ref name="Bank-2022" /><ref name="Spendzharova-2023" /><ref name="Arnold-2022" /><ref>{{Cite web |last=Treeck |first=Johanna |date=2022-07-27 |title=Italian central banker plays down chance of big rate hike in September |url=https://www.politico.eu/article/ecb-ignazio-visco-rate-hike-september/ |access-date=2023-12-20 |website=POLITICO |language=en}}</ref> Purchases will be ended under the TPI either due to increased transmission of monetary policy or the risks have proven to be country-specific.<ref name="Wellink-2023d"/><ref name="Bank-2022" /> So far, the TPI has not been deployed yet.

===== Effects of and critiques on the TPI =====
The TPI enables the Governing Council to a more rapid increase in interest rate,<ref name="Broeders-2023c"/><ref name="Wellink-2023d"/> the first raise in interest rates by the ECB in 11 years.<ref name="Bertoldi-2023c"/><ref name="Martin-2022b"/> and the unpredictable nature of market sentiment could justify the reason for ECB-intervention to stabilise the monetary union,<ref name="Arnold-2023c"/> more or less the same reasoning as for the PEPP.

However, the relationship between the PEPP and the TPI raises questions as the PEPP would remain the first line of defence against transmission risks.<ref name="Wellink-2023d" /> The creation of the TPI seems legally vulnerably: problems in the Euro Area are common and recurring, but it is not automatically the argument to invent a whole new anti-fragmentation tool.<ref name="Wellink-2023d" /> With the TPI, the ECB can put pressure on countries by assessing publicly if they are eligible for the TPI, that is assessing whether the government has conducted adequate fiscal policies and structural reforms to deserve the support of the ECB. This endangers the politic neutrality of the ECB.<ref>{{Cite journal |last1=Campoy |first1=Juan Cristóbal |last2=Negrete |first2=Juan Carlos |date=2023-08-18 |title=Quantitative easing rules as a means to achieve optimal levels of structural reforms and government deficits in a monetary union |journal=The World Economy |volume=46 |issue=9 |pages=2775 |doi=10.1111/twec.13460 |doi-access=free }}</ref> If ever deployed, the usage of the TPI will spark controversy as the conditions to be deployed are not watertight.<ref name="Wellink-2023d" /><ref name="POLITICO-2022b"/>

===== Strategy Review (2020-2021) =====
As a consequence of the COVID-19 crisis, the ECB extended the duration of the strategy review until September 2021. On 13 July 2021, the ECB presented the outcomes of the strategy review, with the main following announcements:

* The ECB announced a new inflation target of 2% instead of its "close but below two per cent" inflation target. The ECB also made it clear it could overshoot its target under certain circumstances.<ref name="Amaro-2021">{{Cite web|last=Amaro|first=Silvia|date=2021-07-08|title=European Central Bank sets its inflation target at 2% in new policy review|url=https://www.cnbc.com/2021/07/08/ecb-lagarde-presents-first-policy-review-in-almost-two-decades.html|access-date=2021-07-10|website=CNBC|language=en}}</ref>
* The ECB announced it would try to incorporate the cost of housing (imputed rents) into its inflation measurement
* The ECB announced an action plan on climate change<ref>{{Cite press release|publisher=European Central Bank|date=2021-07-08|title=ECB presents action plan to include climate change considerations in its monetary policy strategy|url=https://www.ecb.europa.eu/press/pr/date/2021/html/ecb.pr210708_1~f104919225.en.html|language=en}}</ref>

The ECB also said it would carry out another strategy review in 2025.

=== Inflation surge of 2021 ===
In the summer of 2021, coinciding with the European Central Bank's announcement of its revised monetary policy framework and its initiative for climate action, the eurozone witnessed a notable [[2021–2023 inflation|inflationary surge]]. This resurgence of inflation continued to escalate over the following year, culminating in inflation rates reaching double digits for the first time since the 1970s, a year after the ECB's strategic updates.<ref name=":0">{{Cite journal |last1=Goutsmedt |first1=Aurélien |last2=Fontan |first2=Clément |date=2023-11-19 |title=The ECB and the inflation monsters: strategic framing and the responsibility imperative (1998–2023) |url=https://www.tandfonline.com/doi/full/10.1080/13501763.2023.2281583 |journal=Journal of European Public Policy |volume=31 |issue=4 |language=en |pages=999–1025 |doi=10.1080/13501763.2023.2281583 |s2cid=265300761 |issn=1350-1763}}</ref> The inflation rate reached an unprecedented peak of 4.9% in November 2021, marking the highest level since the introduction of the euro.<ref name=":3">{{Cite journal |last=Baltensperger |first=Ernst |date=2023-06-06 |title=The return of inflation |journal=[[Swiss Journal of Economics and Statistics]] |volume=159 |issue=1 |pages=10 |doi=10.1186/s41937-023-00114-x |doi-access=free |issn=2235-6282}}</ref>

==== Framing of the crisis ====
The new era of inflation prompted a significant shift in the European Central Bank's framing compared to its stance in the 2000s. Initially, from its inception until the [[2008 financial crisis]], the ECB's primary objective was price stability, adhering to strict institutional rules that minimized policy trade-offs with other goals beyond price stability.<ref>{{Cite book |last=Drazen |first=A |title=Political economy in macroeconomics |publisher=[[Princeton University Press]] |year=2002 |edition=New |language=English}}</ref><ref>{{Cite journal |last1=Braun |first1=Benjamin |last2=Carlo |first2=Donato Di |last3=Diessner |first3=Sebastian |date=2022 |title=Planning laissez-faire: Supranational central banking and structural reforms |journal=[[Zeitschrift für Politikwissenschaft]] |language=en |volume=32 |issue=3 |pages=707–716 |doi=10.1007/s41358-022-00322-6 |issn=1430-6387|doi-access=free }}</ref> This approach was rooted in the "Central Bank Independence template", advocating that central bank's limited role to price stability and its independence were optimal.<ref>{{Cite book |last=Issing & al |first=O. |title=Monetary policy in the euro area: Strategy and decision-making at the european central bank. |publisher=Cambridge University Press |year=2001}}</ref><ref name=":0" /><ref name=":5">{{Cite journal |last1=Hartmann |first1=Philipp |last2=Smets |first2=Frank |date=2018 |title=The European Central Bank's Monetary Policy during Its First 20 Years |url=https://www.jstor.org/stable/26743874 |journal=Brookings Papers on Economic Activity |volume=2018 |issue=2 |pages=1–118 |doi=10.1353/eca.2018.0026 |jstor=26743874 |s2cid=203324137 |issn=0007-2303}}</ref><ref>{{Cite book |last1=Howarth |first1=David |title=The European Central Bank : The New European Leviathan? |last2=Loedel |first2=Peter |publisher=Palgrave Macmillan |year=2005}}</ref>

However, the post-financial crisis landscape, especially during the [[European debt crisis|sovereign debt crisis]] of the 2010s and subsequent economic stagnation era, necessitated a substantial revision in the ECB's strategy.<ref name=":0" /><ref name=":5" /> The ECB moved away from its original Central Bank Independence template, leading to a blurring of its objective hierarchy. It adopted new strategies such as acting as a [[lender of last resort]] for the banking system and fostering growth through very low interest rates and extensive asset purchase programs, which were designed to help stabilizing specific market segments and in the end revive growth.<ref>{{Cite journal |last1=Rodríguez |first1=Carlos |last2=Carrasco |first2=Carlos A. |date=2016 |title=ECB policy responses between 2007 and 2014: A chronological analysis and an assessment of their effects |url=https://doiserbia.nb.rs/Article.aspx?ID=1452-595X1604455R |journal=Panoeconomicus |volume=63 |issue=4 |pages=455–473 |doi=10.2298/pan1604455r|doi-access=free }}</ref><ref>{{Cite journal |last1=Gabor |first1=Daniela |last2=Ban |first2=Cornel |date=2015-10-12 |title=Banking on Bonds: The New Links Between States and Markets |url=http://dx.doi.org/10.1111/jcms.12309 |journal=Journal of Common Market Studies |volume=54 |issue=3 |pages=617–635 |doi=10.1111/jcms.12309 |s2cid=153924047 |issn=0021-9886}}</ref><ref>{{Cite journal |last1=Johnson |first1=Juliet |last2=Arel-Bundock |first2=Vincent |last3=Portniaguine |first3=Vladislav |date=2019 |title=Adding rooms onto a house we love: Central banking after the global financial crisis |url=https://onlinelibrary.wiley.com/doi/10.1111/padm.12567 |journal=Public Administration |language=en |volume=97 |issue=3 |pages=546–560 |doi=10.1111/padm.12567 |s2cid=158391365 |issn=0033-3298}}</ref>

In 2021, the European Central Bank embraced a significant strategic pivot by adopting its Climate Action Plan along with a new monetary policy strategy.<ref>{{Cite journal |last=Deyris |first=Jérôme |date=2023-09-03 |title=Too green to be true? Forging a climate consensus at the European Central Bank |url=https://www.tandfonline.com/doi/full/10.1080/13563467.2022.2162869 |journal=New Political Economy |language=en |volume=28 |issue=5 |pages=713–730 |doi=10.1080/13563467.2022.2162869 |s2cid=249832219 |issn=1356-3467}}</ref> This shift aimed to institutionalize the ECB's evolving role, moving beyond the singular focus on price stability—a policy shaped largely by the aftermath of the European sovereign debt crisis. Instead, the ECB began acknowledging its multifaceted responsibilities, which now include maintaining financial stability, supporting economic growth, and addressing climate-related objectives.<ref name=":0" /> However, with the [[2021–2023 inflation|surging of inflation in 2021]], some wondered as to whether the European Central Bank would revert to its foundational role, predominantly focused on chasing the “inflation monsters”. The term “inflation monsters<nowiki>''</nowiki> echoes the 2010 video of the ECB where two young people are facing a blue inflation monster unleashing banknotes and threatening to wreck the economy.<ref name=":0" /> Nevertheless, ECB policymakers effectively drew connections between the Central Bank Independence (CBI) framework and the experiences of the stagflation era to rationalize their decision to increase interest rates, avoiding the need for a discourse on regime change. In doing so, they recognized the complex trade-offs inherent in balancing various macroeconomic objectives and the challenging decisions they had to face.<ref name=":0" />

It was with this new monetary strategy that the eurozone found itself facing rising [[2021–2023 inflation|inflation in 2021]].<ref name=":0" /> Recent studies stated that key debate among policymakers centered on whether this inflationary trend would be transitory or permanent. Paul Krugman argued that the current inflationary surge would prove to be transitory, whereas other economists such as Olivier Blanchard and Larry Summers had issued warnings regarding the possible persistence of this inflation.<ref>{{Cite news |last=Krugman |first=Paul |date=2021-12-16 |title=Opinion {{!}} The Year of Inflation Infamy |url=https://www.nytimes.com/2021/12/16/opinion/inflation-economy-2021.html |access-date=2024-01-19 |work=The New York Times |language=en-US |issn=0362-4331}}</ref> Initially, both the European Central Bank and the Federal Reserve misjudged the situation, assuming the inflation spike to be temporary and expecting a swift return to their inflation target. This misperception led to the ECB's initial inaction regarding its [[monetary policy]].<ref name=":1">{{Cite web |last=Storm |first=Servaas |title=In the Footsteps of Ptolemy: The 'Science of Monetary Policy' and the Inflation of 2021-2023 |url=https://www.ineteconomics.org/perspectives/blog/in-the-footsteps-of-ptolemy-the-science-of-monetary-policy-and-the-inflation-of-2021-2023 |access-date=2024-01-13 |website=Institute for New Economic Thinking |language=en}}</ref>

==== Response to the 2021 inflation crisis ====
After big increases in the inflation rates throughout 2021 and 2022, the European Central Bank and the FED finally decided to raise their interest rates and abandon their very low interest rates, for the first time since the sovereign debt crisis and the end of the CBI era, as it had become clear the inflationary trend wasn't temporary.<ref name=":0" /> This decision came in late July 2022 for the ECB, when the inflation rate in the eurozone was already at 8.9% and had been higher than the 2% target for more than a year, and in March 2022 for the FED.<ref>{{Cite web |last1=Heimberger |first1=Philipp |last2=Steininger |first2=Lea |date=2022-08-15 |title=ECB interest rate hikes will damage climate protection policies |url=https://blogs.lse.ac.uk/europpblog/ |access-date=2024-01-13 |website=LSE European Politics and Policy (EUROPP) blog}}</ref> The European Central Bank's response to the Federal Reserve's actions can partly be attributed to concerns about imported inflation from the USA. Specifically, if the FED increases its policy rates while the ECB remains static, it could lead to a depreciation of the euro against the dollar. Such a scenario would likely result in higher import costs for the eurozone, as many global trade goods are priced in dollars. On the other hand, this would benefit the US economy by making imports from the eurozone cheaper.<ref>{{Cite journal |last1=Degasperi |first1=Riccardo |last2=Hong |first2=Seokki Simon |last3=Ricco |first3=Giovanni |date=2023-01-13 |title=The Global Transmission of U.S. Monetary Policy |url=https://ideas.repec.org//p/crs/wpaper/2023-02.html |journal=Working Papers |language=en}}</ref><ref>{{Cite journal |last1=Breitenlechner |first1=Max |last2=Georgiadis |first2=Georgios |last3=Schumann |first3=Ben |date=2022-10-01 |title=What goes around comes around: How large are spillbacks from US monetary policy? |url=https://www.sciencedirect.com/science/article/pii/S0304393222000940 |journal=Journal of Monetary Economics |volume=131 |pages=45–60 |doi=10.1016/j.jmoneco.2022.07.001 |issn=0304-3932|hdl=10419/238263 |hdl-access=free }}</ref><ref name=":2">{{Cite journal |last1=Moessner |first1=Richhild |last2=Xia |first2=Dora |last3=Zampolli |first3=Fabrizio |date=2023-06-01 |title=Global Inflation and Global Monetary Policy Tightening: Implications for the Euro Area |url=https://www.sciendo.com/article/10.2478/ie-2023-0031 |journal=Intereconomics |language=en |volume=58 |issue=3 |pages=151–154 |doi=10.2478/ie-2023-0031 |issn=1613-964X|hdl=10419/275711 |hdl-access=free }}</ref>

Furthermore, the impact of US dollar appreciation, following the FED's policy rate hikes, tends to be more pronounced in the international inflation rates of energy and food. These commodities are commonly priced in US dollars, making their inflation rates more sensitive to exchange rate variations.<ref>{{Cite journal |last=Moessner |first=Richhild |date=2022 |title=Effects of Precipitation on Food Consumer Price Inflation |url=https://www.ssrn.com/abstract=4235476 |journal=SSRN Electronic Journal |language=en |doi=10.2139/ssrn.4235476 |hdl=10419/265996 |s2cid=252772695 |issn=1556-5068|hdl-access=free }}</ref> In the European Union, public inflation expectations are significantly influenced by the prices of energy and food. Thus, this form of imported inflation can further exacerbate overall inflation levels of the eurozone.

The ECB also declared its intention to systematically diminish net asset purchases within their asset purchase program (APP) and end them under the pandemic emergency purchase program (PEPP) launched during the COVID crisis by the first trimester of 2022.<ref name=":0" /> On the other hand, the Federal Reserve initiated the reduction of its asset purchase program in November 2021, to finally stop it by March 2022. The Asset Purchase Programs of the ECB initially boosted asset values on bank balance sheets and led to expectations of lower future short short-term interest rates. These programs also raised inflation expectations, eventually reanchoring long-term inflation expectations. Phasing out the Asset Purchase Programs thus signals alignment with the different policy rate hikes in an attempt to cool down the economy and demonstrates a commitment to combating inflation.<ref>{{Cite journal |last1=Burlon |first1=Lorenzo |last2=Notarpietro |first2=Alessandro |last3=Pisani |first3=Massimiliano |date=2019-11-01 |title=Macroeconomic effects of an open-ended asset purchase programme |url=https://www.sciencedirect.com/science/article/pii/S0161893819300250 |journal=Journal of Policy Modeling |volume=41 |issue=6 |pages=1144–1159 |doi=10.1016/j.jpolmod.2019.03.005 |issn=0161-8938}}</ref><ref>{{Cite report |url=https://econpapers.repec.org/paper/ecbecbwps/20161956.htm |title=The ECB's asset purchase programme: an early assessment |last1=Breckenfelder |first1=Johannes |last2=De Fiore |first2=Fiorella |date=2016 |publisher=European Central Bank |issue=1956 |last3=Andrade |first3=Philippe |last4=Karadi |first4=Peter |last5=Tristani |first5=Oreste}}</ref><ref>{{Cite journal |last1=Benigno |first1=Pierpaolo |last2=Canofari |first2=Paolo |last3=Di Bartolomeo |first3=Giovanni |last4=Messori |first4=Marcello |date=July 2023 |title=The ECB's asset purchase programme: Theory, effects, and risks |url=https://onlinelibrary.wiley.com/doi/10.1111/joes.12521 |journal=Journal of Economic Surveys |language=en |volume=37 |issue=3 |pages=890–914 |doi=10.1111/joes.12521 |hdl=11385/223759 |s2cid=250636847 |issn=0950-0804|hdl-access=free }}</ref>

Research indicates that the European Central Bank responded to the escalating inflation more slowly and cautiously than the FED, showing hopes that a moderate tightening of monetary policy would suffice. The ECB was notably slower in acknowledging the mistaken nature of its initial assumption that the inflationary trend would be transitory.<ref name=":3" /> The transition away from extremely low interest rates was soon accompanied by various rate increases, culminating in the ECB's main rate reaching 4% by the end of September.<ref>{{Cite web |last=Board of Governors of the Federal Reserve System (US) |date=1954-07-01 |title=Federal Funds Effective Rate |url=https://fred.stlouisfed.org/series/FEDFUNDS |access-date=2024-01-19 |website=FRED, Federal Reserve Bank of St. Louis}}</ref> In contrast, the FED's latest rate hike elevated the Effective Federal Funds Rate to 5.33% in August, underscoring a more aggressive and rapid tightening of monetary policy compared to the ECB's approach.<ref>{{Cite web |date=2023-12-13 |title=Official interest rates |url=https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html |access-date=2024-01-19 |website=European Central Bank |language=en}}</ref> However, the global monetary tightening cycle turned out to be the most synchronized one in the past half-century. By February 2023, more than 90% of economies had hiked their policy rates. The latest peak of highly synchronized action by central banks was during the 1970s and the oil prices shocks where 70% of them had raised their interest rates.<ref name=":2" />

==== Critics regarding the new monetary policy ====
Criticism first emerged regarding the methodologies used for inflation estimation and their failure to anticipate the inflation surge. A primary critique focused on the inadequacy of traditional tools like the Phillips Curve, which examines the relationship between inflation and certain economic activity indicators, for accurately forecasting inflation.<ref name=":1" /><ref name=":6">{{Cite journal |last1=Baba |first1=Chikako |last2=Duval |first2=Romain |last3=Lan |first3=Ting |last4=Topalova |first4=Petia |date=2024-01-11 |title=The 2021-22 inflation surge in Europe: a Phillips-curve-based dissection |url=https://www.tandfonline.com/doi/full/10.1080/13504851.2024.2303383 |journal=Applied Economics Letters |language=en |pages=1–6 |doi=10.1080/13504851.2024.2303383 |issn=1350-4851}}</ref> During the 1970s, the Phillips Curve also faced significant criticism for its inability to accurately predict the inflation experienced in that decade. This period marked a critical reassessment of the curve's predictive capacity, particularly in the context of the economic phenomena of the time.<ref>{{Cite journal |last1=Atkeson |first1=Andrew |last2=Ohanian |first2=Lee E. |date=December 2001 |title=Are Phillips Curves Useful for Forecasting Inflation? |url=http://dx.doi.org/10.21034/qr.2511 |journal=Quarterly Review |volume=25 |issue=1 |doi=10.21034/qr.2511 |issn=0271-5287}}</ref> Traditional indicators used for forecasting economic dynamics, such as the output and unemployment gaps, were found to be inadequate in signaling the overheating of the economy and the prevailing tight labor market conditions.<ref name=":1" /><ref name=":6" /><ref>{{Cite journal |last=Lavoie |first=Marc |date=2024-01-05 |title=Conflictual Inflation and the Phillips Curve |url=https://www.tandfonline.com/doi/full/10.1080/09538259.2023.2294305 |journal=Review of Political Economy |volume=36 |issue=4 |language=en |pages=1397–1419 |doi=10.1080/09538259.2023.2294305 |s2cid=266796071 |issn=0953-8259}}</ref> Moreover, the important belief among central banks that sustained inflationary increases are a consequence of unanchored long-term inflation expectations was challenged during 2021–2022. During this period, inflation expectations remained relatively stable, leading to the misinterpretations by the European Central Bank and other monetary authorities regarding the inflationary trend's nature.<ref name=":1" /> Both the FED and the ECB argued that the rise in inflation was only temporary and was the sole result of post-pandemic supply disruptions on a few selected goods and services (food and energy). The FED and the ECB then maintained their expansionary monetary policy, keeping interest rates low.<ref name=":3" />

Some critics have also emerged saying that it was complicated for independent central banks, including the ECB, to accurately assess during a synchronized policy rate hike the potential spillovers of cross-countries monetary policy on the inflation. This might lead to excessive monetary tightening (higher interest rates) in unusual circumstances.<ref name=":2" />

Concerns have also been raised about the European Central Bank's effectiveness in addressing the recent surge in energy prices.<ref name=":4">{{Cite journal |last1=Ider |first1=Gökhan |last2=Kriwoluzky |first2=Alexander |last3=Kurcz |first3=Frederik |last4=Schumann |first4=Ben |date=2023 |title=The Energy-Price Channel of (European) Monetary Policy |url=https://ideas.repec.org//p/zbw/vfsc23/277710.html |journal=VFS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" |language=en}}</ref> Some experts suggest that the eurozone should be viewed as a small open economy, implying that changes in its demand may not significantly impact global prices. Moreover, they argue that monetary policy might have minimal influence on the global demand for energy. This is because household demand for essentials like heating and transportation is believed to be relatively insensitive to price changes.<ref name=":4" /> Additionally, while a stronger euro could theoretically lead to lower import prices, it's uncertain whether these savings would be effectively passed on to consumers.

However, recent studies contradict these views by highlighting the significant role of energy prices in the transmission of monetary policy within the eurozone. An increase in the ECB's policy rates tends to appreciate the euro against the dollar. This appreciation can lead to higher local energy costs but may also reduce demand, potentially lowering global energy prices. These studies support the ECB's decision to follow the Federal Reserve's lead in raising policy rates, which appears to have been a strategic move to curb imported inflation and address the spike in energy prices.<ref name=":4" />

==== Effects of the monetary tightening ====
The implementing a of tighter monetary policy has emerged as the eurozone solution to fight the latest inflationary pressure. However, this approach bears the risk of hindering the progress of the economic revival post-[[COVID-19 pandemic|COVID]].<ref name=":7">{{Cite journal |last1=Ider |first1=Gökhan |last2=Kriwoluzky |first2=Alexander |last3=Kurcz |first3=Frederik |title=DIW Berlin: ECB Can Lower Fuel and Heating Costs by Increasing Interest Rates but Would Risk Economic Recovery |url=https://www.diw.de/sixcms/detail.php?id=diw_01.c.838570.de |access-date=2024-01-15 |journal=Diw Weekly Report |date=2022 |language=de |doi=10.18723/diw_dwr:2022-14-1}}</ref> 
[[File:Evolution_of_the_MRO_rate_and_the_HICP_for_the_EU.png|thumb|Evolution of the MRO rate and the HICP for the EU<ref>{{Cite web |last=European Central Bank |date=2024 |title=European Central Bank Data Portal. |url=https://data.ecb.europa.eu |access-date=19 January 2024}}</ref>]]
Raising interest rates is a strategic move by the ECB with specific aims: to decelerate economic activity, stabilize inflation expectations, and steer towards lower inflation levels. Studies have shown that as interest rates rise, the price on the world market does not really change. However, the Euro becomes more attractive to investors, leading to its appreciation against other currencies. This change benefits households paying for gas in Euros, as it translates into lower prices for dollar-traded oil.<ref name=":7" />

On the other hand, the increase in interest rates, while helping to suppress prices, also places strains on the manufacturing sector and the labor market. The aftermath of this shock sees tighter financing conditions and a dip in demand, resulting in a slight uptick in unemployment rates, going beyond 0.1 percentage points. Although the study shows that manufacturing sector quickly rebounds, returning to its pre-shock state within about three months, the impact on unemployment rates lingers for a longer period.<ref name=":7" />

=== 2025 ===

In May 2025, the European Central Bank launched a platform involving around 70 market participants to test digital euro payment functionalities and use cases. The initiative includes banks, fintechs, and merchants, aiming to simulate a digital euro ecosystem and support the development of future payment solutions.<ref>https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr250505~00207689f9.en.html</ref>