ECB Centeno: Flexible PEPP reinvestments are a powerful tool


  • We do not see inflation expectations unanchoring
  • Sees no specific spread target for ECB crisis tool
  • A new tool is needed to make monetary policy work

Some members of the ECB had floated a spread of 150 basis points as usual between German and Italian yields. Currently, the Italian 10s are at 3.56% while the German Bunds are at 1.46%.

The risk for a new ECB program is to go against the laws of monetary financing. I’m also worried that they’ll end up bringing a knife to a shootout.


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