ECB’s Müller: Don’t Overestimate Impact of Higher Yields on Recovery
12 March 2021
By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Madis Müller said Friday that the impact of rising yields on the economic recovery shouldn’t be overestimated.In an op-ed piece in Estonian daily newspaper Postimees, Müller, who heads the Estonian central bank, called the rise in government bond yields ‘signficant’ from a central bank’s point of view, but pointed out that sovereigns were still able to benefit from very low interest rates.
‘The impact of rising long-term government bond yields on economic recovery or central bank decisions should not be overestimated, especially as lending rates remain very favourable for both companies and individuals’, he said. ‘However, it is one of several indicators that we monitor when assessing the price and availability of credit.’
The Governing Council decided to ‘temporarily increase the pace of [asset] purchases, but their planned total volume will remain the same’, he said.
Europe’s economy remains in a ‘quite difficult’ situation, he said, but ‘it is already possible to say that the clarity regarding the expected recovery is much higher than a few months ago.’
The slow pace of vaccination does not change this, he said, as it nonetheless comes with useful information about the rapidity with which people will be vaccinated and the effectiveness of the vaccines.
‘[T]he economic outlook has clearly improved outside Europe, especially in the US,’ whose massive economic stimulus would have positive spillover effects here, he said. The first quarter of this year in Europe would show ongoing decline, with the recovery occurring in the second half and pre-pandemic levels of output reached ‘around the middle of next year’, he said.