FRANKFURT (Reuters) – The following are key quotes from European Central Bank policymakers on the recent volatility in sovereign bond markets in the run up to Thursday’s policy meeting.
CHRISTINE LAGARDE, ECB PRESIDENT, FEB 22
“The ECB is closely monitoring the evolution of longer-term nominal bond yields.”
FABIO PANETTA, ECB BOARD MEMBER, MARCH 2
“The steepening in the nominal GDP-weighted yield curve we have been seeing is unwelcome and must be resisted.
“We should not hesitate to increase the volume of purchases and to spend the entire PEPP envelope or more if needed. In this way, we can prevent a tightening of financing conditions.
“It might be tempting to conclude that there is less need for monetary policy support. But I will argue today that this temptation must be resisted.
“At present, the risks of providing too little policy support still far outweigh the risks of providing too much.”
PHILIP LANE, ECB CHIEF ECONOMIST, FEB 25
“The two key yield curves in the euro area for the funding conditions of all sectors in the economy are the overnight index swap curve – a proxy for a risk-free curve in the euro area – and the GDP-weighted sovereign bond yield curve. Ensuring that the risk-free yield curve remains at highly accommodative levels is a necessary.
“Accordingly, the ECB is closely monitoring the evolution of longer-term nominal bond yields.
ISABEL SCHNABEL, ECB BOARD MEMBER, FEB 26
“A rise in nominal yields that reflects an increase in inflation expectations is a welcome sign that the policy measures are bearing fruit. Even gradual increases in real yields may not necessarily be a cause of concern if they reflect improving growth prospects.
“However, a rise in real long-term rates at the early stages of the recovery, even if reflecting improved growth prospects, may withdraw vital policy support too early and too abruptly given the still fragile state of the economy. Policy will then have to step up its level of support.
FRANCOIS VILLEROY DE GALHAU, FRENCH CENTRAL BANK CHIEF, MARCH 1
“In so much as this tightening is unwarranted, we can and must react against it, starting with an active flexibility of our PEPP purchases,
“we are determined to maintain, as long as necessary, a very accommodative monetary stance.”
PABLO HERNANDEZ DE COS, SPANISH CENTRAL BANK CHIEF, MARCH 3
“The increases in long-term nominal interest rates have not been accompanied by increases of the same magnitude in long-term inflation expectations… This may have a negative impact on economic activity and thus inflation.
“These developments underline the importance of avoiding premature increases in nominal interest rates.
YANNIS STOURNARAS, GREEK CENTRAL BANK CHIEF, FEB 26
“In my view, there is an unwarranted tightening of bond yields, so it would perhaps be desirable for the ECB to accelerate the pace of PEPP purchases to ensure favourable financing conditions during the pandemic.
“In my view there’s no fundamental justification for a tightening of nominal bond yields in the long end.”
KLAAS KNOT, DUTCH CENTRAL BANK CHIEF, MARCH 4
“I think the starting point should be that the rise in rates reflects better growth prospects and higher inflation expectations and that in itself is a positive.”
(Reporting by Balazs Koranyi; Editing by Chizu Nomiyama)
