To ensure that the monetary policy stance is transmitted appropriately across jurisdictions, the ECB Governing Council decided, in July, on a new monetary policy tool, the Transmission Protection Instrument (TPI). If deemed necessary, it would allow the Eurosystem to purchase securities on the secondary market in jurisdictions that experience an unwarranted deterioration in financing conditions according to certain criteria.
This brings me to the third and final force, namely the formation of expectations. Ultimately, the risks to longer-term price stability, whether resulting from wage-price dynamics or perhaps from fiscal concerns, is linked to the risk that inflation expectations will become de-anchored. The risk of deanchoring, in turn, rests critically on the way expectations are formed.