“We should accommodate rises in market-based long-term inflation expectations to ensure they translate into lower long-term real interest rates,” European Central Bank (ECB) Governing Council member Pablo Hernandez de Cos argued on Friday, per Reuters.
Additional takeaways
“Pandemic Emergency Purchase Program (PEPP) purchases should be adjusted in order to counter the rise in interest rates if the increase is not accompanied by the return of medium-term inflation.”
“A point target of exactly 2% would be a good choice regarding the ECB’s new inflation aim in the upcoming strategy.”
“Introducing temporary and moderate inflation overshoots in monetary policy strategy is likely to have modest effects on inflation expectations.”
“In current circumstances, it may be necessary to allow national fiscal authorities more leeway for pursuing growth-enhancing fiscal policies.”
Market reaction
The EUR/USD pair showed no immediate reaction to these remarks and was last seen gaining 0.35% on a daily basis at 1.2057.
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