EU’s Gas Price Cap Scheme Could Backfire, Raise Volatility: ECB
FRANKFURT—Proposed European Union rules aimed at tempering natural gas price spikes may actually jeopardize financial stability and need to be redesigned, the European Central Bank said on Thursday in a formal opinion.
The EU proposed a “market correction mechanism” last month aimed at tempering natural gas prices and market volatility after a spike in energy costs pushed inflation to record highs and raised financial market stress in energy derivatives trading.
The ECB, a guardian of the bloc’s financial stability, acknowledged that the goal was to moderate extreme price levels and volatility, but warned that the rules could achieve the exact opposite….