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ECB calls unscheduled meeting to discuss market turmoil

The European Central Bank has convened an unscheduled meeting of its board of directors to discuss the recent bond market sell-off, raising the prospect of announcing a new tool to deal with rising borrowing costs in the weaker eurozone economies. to grab.

The ECB said: “The Governing Council will hold an ad hoc meeting on Wednesday to discuss current market conditions.”

The move raised investor expectations that it was in the process of announcing a policy tool to prevent the recent bond sell-offs of certain countries from sparking another debt crisis in the region.

The euro recovered some of its losses and rose 0.5 percentage points against the dollar to $1.0475 early Wednesday after the ECB statement was reported by news wires.

Borrowing costs for heavily indebted countries like Italy and Spain have risen to an eight-year high since the ECB last week announced an end to ultra-easy monetary policy over the past decade by announcing plans to stop buying. of more bonds and start raising interest rates.

The difference between the Italian and German borrowing costs – the so-called spread – has widened to 2.4 percentage points, doubling from last year and rising from about 2 percentage points before last week’s ECB meeting.

Isabel Schnabel, member of the ECB’s Governing Council, said in a speech on Tuesday evening that the central bank was getting closer to intervening in bond markets. year”.

She added: “Such changes in financing conditions can create barriers to monetary policy transmission that should be closely monitored.”

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