ECB’s Schnabel: ECB still has some room to cut interest rates

The European Central Bank (ECB) Executive Board Member, Isabel Schnabel crossed the wires in the last hour, saying that gradual increases in real yields may not necessarily be a cause of concern.3

Key Quotes:

• If a rise in nominal yields reflects an increase in inflation expectations is a welcome sign.
• Changes in nominal rates have to be monitored closely.
• A rise in real long-term rates at the early stages of the recovery may withdraw vital policy support too early and too abruptly.
• Risks of moral hazard should not condemn the central bank to a course of inaction.
• ECB may need to add support if yields hurt growth.
• ECB still has some room to cut interest rates.

The comments did little to influence the shared currency or provide an impetus to the EUR/USD pair, which was last seen trading with modest losses around mid-1.2100s.