© Reuters. FILE PHOTO: A view of signage exterior the European Central Financial institution (ECB) constructing in Frankfurt, Germany October 27, 2022. REUTERS/Wolfgang Rattay
FRANKFURT (Reuters) – The European Central Financial institution ought to let long-term borrowing prices rise too, because it will increase short-term rates of interest to battle runaway costs within the euro zone, ECB policymaker Joachim Nagel stated on Thursday.
The ECB has been elevating its coverage charges at file pace however it’s nonetheless shopping for bonds to replenish its 5-trillion-euro ($5.07 trillion) stimulus portfolio, which has a dampening influence on long-term bond yields.
Nagel’s feedback seemingly symbolize a name on the ECB to begin unwinding these bond holdings – legacy of a decade spent making an attempt to spice up inflation when it was too low – even earlier than its final charge hike, which the market expects in the summertime.
“I discover it inconsistent to maneuver short-end charges in a single course and longer-end charges within the different course,” Nagel stated. “When you might have two coverage normalisation instruments at hand, it does not make sense to make use of simply one among them.”
ECB vice-president Luis de Guindos stated earlier this week that this so-called quantitative tightening could begin whereas charges are nonetheless being elevated.
The ECB stated it could start discussing the way it reinvests proceeds from bonds that mature at its Dec. 15 assembly.
($1 = 0.9865 euros)
