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Markets

Rising euro zone yields may reflect better growth, inflation

  • Some policymakers argue that the steady increase in bond yields is an unwarranted increase while others argue that it is a reflection of what is likely to be a robust recovery in both growth and inflation after the pandemic.
Published March 4, 2021

FRANKFURT: The recent rise in euro zone borrowing costs may reflect improved growth and inflation prospects, European Central Bank policymaker Klaas Knot said on Thursday, weighing on the debate about the root cause of recent market turbulence.

Some policymakers argue that the steady increase in bond yields is an unwarranted increase while others argue that it is a reflection of what is likely to be a robust recovery in both growth and inflation after the pandemic.

"I think the starting point should be that the rise in rates reflects better growth prospects and higher inflation expectations and that in itself is a positive," Knot told an online event with Politico, referring to the discussion in the next Governing Council meeting.

The ECB will next meet on March 11 and policymakers are divided about whether to step up the flow of bond purchases to stem the yield rise.

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