The European Central Bank is aiming to stop bond yields from rising before the pandemic-hit euro zone economy is ready to digest higher borrowing costs, the ECB’s chief economist Philip Lane said today.
The ECB decided last week to accelerate bond purchases for the next three months to counter a rise in bond yields.
Policymakers deem the increases at least partly unwarranted for an economy still struggling under the Covid-19 pandemic.
“Our objective is basically to make sure the yield curves, which play an important role in determining overall financing conditions, do not move ahead of the economy,” Professor Philip Lane told the Financial Times.
With the ECB in the middle of a strategic review, Professor Lane added there was a “strong logic” in announcing that inflation would be allowed to overshoot the ECB’s 2% target given that it had lagged it for so long, as the US Federal Reserve has done.
But he cautioned there were “other options that may also be successful in anchoring inflation expectations”.