The European Central Bank on Thursday lifted interest rates by 50 basis points, or half a percentage point, and approved a new tool designed to keep yields on bonds of stressed eurozone countries from spiraling to unsustainable levels. The ECB lifted the rate on its deposit facility to 0% from -0.5%, while the refi rate and the rate on its marginal lending facility were lifted to 0.5% and 0.75%, respectively. The ECB said it approved a new Transmission Protection Instrument, or TPI. The ECB said the 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 scale of TPI purchases depends on the severity of the risks facing policy transmission. Purchases are not restricted ex ante.”
