Published July 24, 2022 8:00 am est
by Richard F. Cason, 
Editor in Chief,
NewsMovesmarketsForex
Key Issues-
- ECB raised interest rates by 50 bps to .50 percent on July 21, 2022, the first time in over a decade
- ECB implements news central bank tool to its arsenal+ “THE TRANSMISSION PROTECTION INSTRUMENT, (TIP}. the tool will be used to “support the effective transmission of monetary policy across all euro area countries…can be activated to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy within eurozone”
- ECB also raised the deposit facility rate by 50 bps to. 0.00% as well as the Marginal Lending Facility by 50 bps to .75%
- The reason for the 50 bps rate hike was primary based on High sustain Euro Zone Inflation rate which is currently 8.6% as well as the negative impact on the euro currency rate
The European Central Bank hike interest rates by 50 base points to .50% on July 21, 2022, in an effort to attempt to curve the negative impact of high inflation within the European economy. The European governing Council also decided to increase the rate on the marginal lending facility by 50 bps to .75%, as well as the deposit facility rate by 50 bps to 0.00%.
Live Video coverage of European Central Bank President Christine Lagarde historic 50 bases point rate hike on July 21, 2021
What Exactly is this new ECB Transmission Protection Instrument, (TPI) tool and what are the circumstances of employment?
Transmission Protection Instrument tool was established by the European Central Bank for the purpose to support the effective transmission of monetary policy within the Eurozone countries. President Lagarde emphasized that TPI..”can be activated to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across the euro area.
The circumstances that TIP can he used…”subject to fulfilling established criteria, the Eurosystem will be able to make secondary market purchases of securities issued in jurisdictions experiencing a deterioration in financing conditions not warranted by country-specific fundamentals, to counter risks to the transmission mechanism to the extent necessary.
Purchase parameters, Public sector securities (marketable debt securities issued by central and regional governments as well as agencies, as defined by the ECB) with a remaining maturity of between one an d ten years. Purchases of private sector securities could be considered, if appropriate.”
Expert Central Bank Analysist by World Renown ADM Investor Services International Chief Economist Marc Ostwald
Marc Ostwald who is an expert Chief Economist & Global Strategist with ADM Investor Services International head quartered in London England, 
gives his insights and opinion on what he thought the European Central Bank would do in Thursday interest rate decision meeting held in Frankfurt, Germany, Mr. Ostwald eloquently stated that:
“ The much anticipated ECB meeting will be front center… – The ECB is expected to stick to its pre-announced initial 25 bps rate hike (on all rates), despite a good deal of speculation that it might opt for 50 bps, but with Rehn reaffirming the already signalled 25 bps in July and a 50 bps move in September last Friday, this looks unlikely.
The bigger immediate policy and credibility challenge for the ECB is to deliver on its anti-fragmentation tool, given the political crisis in Italy. What markets want to know about are: a) size – unlimited? b) what are the triggers for activation, and when? c) what are the conditionalities, e.g. in terms of fiscal policy requirements and targets; d) what form of ‘sterilization’ might be deployed to neutralize the impact on the ECB’s balance sheet? e) Will this be limited to govt bonds, or also include private sector debt, and will there be limits on the maturities of what might be purchased?
All the anecdotal evidence from “sources” suggests that the ECB council is not agreed on any of the above points, with the hawks objecting in principle to setting numeric targets for spreads.
There has also been some talk about trade-offs to agreeing to the mechanism in return for a more aggressive rate path, which to be frank would be the sort of stupid compromise that prompts a major policy error, and/or something that markets view either as ‘unworkable, or a ‘red rag to a bull’ to test the ECB’s resolve.
It is certainly safe to say that the ECB cannot afford any slip ups in its communication. It will also reiterate its long held line on the Euro that it has no target for the currency, but is always sensitive to any sharp or disorderly moves, above all in terms of their inflation implications..”
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Expert Economist:
Marc Ostwald an expert Chief Economist & Global Strategist with ADM Investor Services International
Marc Osterwall is a world renowned Expert Economist who Analyzes and forecast macro/microeconomic trends and central bank policies on a exponential economic level. Mr. Osterwall is a regular guest on Bloomberg BNN, HT & Radio, BBC, CNBC, Le Fonti International and is widely quoted on newswires, newspapers, and other digital media worldwide. He is also a regular conference speaker and guest lecturer at various universities.
