Enlarge image
Euro sign in front of the headquarters of the European Central Bank
Photo: Kai Pfaffenbach/ REUTERS
The European Central Bank (ECB) surprisingly called an extraordinary meeting of its Council in view of the high inflation and unrest on the financial markets.
"The Governing Council will hold an ad hoc meeting on Wednesday to discuss current market conditions," an ECB spokesman said on Wednesday morning.
The euro rose to an intraday high of $1.0493 after the meeting was announced.
The currency watchdogs want to discuss the consequences of the latest sell-off on the bond market at the council meeting.
According to several insiders, the meeting is scheduled for 11 a.m.
However, it is not yet clear whether a message will be published.
Some council members, who were actually expected at an event in Milan this Wednesday, had canceled their trip there because of the council meeting.
At its meeting in Amsterdam last week, the ECB announced that it would raise interest rates by 0.25 percentage points at its next regular meeting on July 21.
In September, it may also be “appropriate to take a larger interest rate step,” it said.
Net bond purchases under the APP bond purchase program are expected to end by the end of June.
Interest rates on the capital markets had already risen sharply in the past few days, while sentiment on the stock markets had deteriorated significantly.
Analysts cited the US Federal Reserve's tighter monetary policy as the main reason, but also the prospect of interest rate hikes by the ECB.
Interest rates in southern European countries have recently risen particularly sharply.
In Italy, the interest rate for ten-year government bonds is back above the four percent mark.
At the end of March it was only half as high.
The yield difference (spread) between German government bonds and those of more heavily indebted southern euro countries, especially Italy, had climbed to its highest level in over two years.
According to experts, the higher risk premiums could become a problem for such heavily indebted euro countries.
According to ECB Director Isabel Schnabel, the central bank is closely monitoring developments on the bond market.
Speaking in Paris on Tuesday, she said monetary policy can and should respond to a disorderly repricing of risk premiums that threatens price stability and thwarts central bank actions.
If necessary, the ECB will also develop and use new instruments.
These could be designed differently and would remain within the mandate, she said.
According to the German ECB director, a first antidote to curbing the yield gaps is the flexible reinvestment of funds from expired bonds as part of the multi-trillion PEPP bond purchase program.
kig/dpa-AFX/AFP/Reuters