ECB policy tightening raises risks of ‘financial accident’ – Financial Times

A likelihood of an abrupt slowdown in the European Central Bank’s (ECB) stimulus programme and aggressive monetary policy tightening spook investors, as they foresee a turmoil in the Italian and Greek bonds markets, the Financial Times carried a story on Wednesday, citing analysts.

Key takeaways

“Government debt across the currency bloc has tumbled since last week’s ECB meeting when president Christine Lagarde declined to rule out the possibility of a rise in interest rates this year as the central bank battles record-high inflation.”

“For bond investors, that prospect is particularly concerning because the ECB has repeatedly stressed that it will wind down its vast bond purchasing programmes before lifting rates.”

If the central bank hurries to the exit, investors may once again choose to focus on the daunting debt loads of Italy and Greece, worth around 160 percent and 200 percent of gross domestic product respectively.”

Related reads

ECB's Villeroy: Market reaction to the ECB meeting may have been too strong

EUR/USD faces further gains above 1.1485 – UOB