ECB Governing Council member Pablo Hernandez de Cos said today, “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,” he added.
Instead, “in a setting where inflation expectations are well below our aim, a decrease in real interest rates would have made a greater contribution to the recovery and helped achieve this aim,” he said. “The need to maintain very accommodative financing conditions is justified because we are a long way from achieving our inflation aim.”
