The ECB’s masterplan to manipulate markets

are supposed to follow a strict division of labour. The central bank sets the risk-free rate to stimulate or cool the overall economy, but it is “market-neutral”: it does not favour any asset over another. Private investors choose who to lend to and at what risk premium. Combine the two judgments, and the economy should have a set of interest rates that reflects economic conditions. The European Central Bank (), however, thinks markets are not doing their job—or at least not the way it wants. It is preparing to intervene in two novel ways: by limiting what it deems an acceptable difference (or spread) in rates between sovereign borrowers; and by greening its bond purchases and banking rules. In doing so it will abandon market neutrality and discriminate between assets.