A senior European Central Bank official on Tuesday reaffirmed the institution's determination to "
fight
" an excessively steep rise in interest rates which could weaken the recovery, going so far as to quote the star duo of electro, Daft Punk, in conclusion of his explanation.
To demonstrate to the markets that the rise in sovereign bond rates in the euro zone, in the wake of US bonds, is not "
tolerated
", the guardians of the euro must be ready to act, explained Fabio Panetta, member. Italian of the Executive Board of the ECB in a speech transmitted by the latter.
Read also: The ECB is worried about the rise in government bond rates
The Frankfurt institution "
must not hesitate
" to use the entire envelope of its main anti-crisis weapon, the emergency purchase program in the face of the pandemic (PEPP), or 1.850 billion euros , again suggested Fabio Panetta.
The president of the monetary institute, Christine Lagarde, and other members of the management board, have already signaled in recent days that they will not stand idly by if bond yields were to rise uncontrollably.
Meeting to decide on monetary policy on March 11
A few days before the next meeting to decide on monetary policy in the euro zone, on March 11, Fabio Panetta now clearly evokes the possibility of a "
firm commitment to control
" the yield curve.
The objective: "to
preserve favorable financing conditions to support the
European economic
recovery
" and the rise in inflation to a level close to but below 2%, the ECB's objective for its monetary policy.
The 10-year Bund yield recently hit levels slightly above -0.25%, the highest since March 2020, while the 10-year US bond yield is hovering around 1.50% after a galloping rally.
So far, just under half of the PEPP envelope has been committed to date, according to LBBW bank.
While the ECB tries to establish clear indicators to measure the favorable financing conditions of the economy, Fabio Panetta suggests that this requires “
an increased focus
” on sovereign rates and those of corporate bonds.
To support the European economy, the ECB recommends a “
Harder, better, faster, stronger
” approach, notes Fabio Panetta mischievously, taking up the title of one of the hits of the French duo Daft Punk who recently stirred the world by announcing its separation.
"The
more we try to close the
production and inflation
deficits
" that the pandemic has caused, "the
better the prospects for the euro area economy will be
," he said.
“
And the faster we get there, the stronger our growth potential will be.
"For this leader,"
the risk of supporting too little (the economy) remains much higher than that of not doing enough
".
