ECB Executive Board Member Isabel Schnabel said a a speech that “changes in nominal rates have to be monitored closely and interpreted in the light of their driving forces”. “A rise in nominal yields that reflects an increase in inflation expectations is a welcome sign”. Even gradual increase in real yields may not be a 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”.
In the latter case, Schnabel warned, “policy will then have to step up its level of support.”