FRANKFURT, Nov 10 (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 struggle runaway costs within the euro zone, ECB policymaker Joachim Nagel mentioned on Thursday.
The ECB has been elevating its coverage charges at document velocity 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 doubtless 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 mentioned. “When you’ve got two coverage normalisation instruments at hand, it does not make sense to make use of simply one in every of them.”
ECB vice-president Luis de Guindos mentioned earlier this week that this so-called quantitative tightening could begin whereas charges are nonetheless being elevated.
The ECB mentioned it might start discussing the way it reinvests proceeds from bonds that mature at its Dec. 15 assembly.
($1 = 0.9865 euros)
Reporting By Francesco Canepa
Modifying by Gareth Jones
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