The ECB’s press release following its unscheduled meeting fell short of announcing a fleshed out spread-fighting tool that could provide a permanent solution to the problem. Flexible PEPP reinvestments might buy policymakers a little time, but the new “anti-fragmentation instrument” that the Bank is working on will need to go a whole lot further. And there is no guarantee that they reach a consensus on such a tool at the next policy meeting in July, so we could see spreads widen further before a new tool is in place.
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