Editing European Central Bank (section)

==== 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.