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The recent rise in real rates may have a negative impact on inflation and growth, European Central Bank (ECB) Governing Council member Pablo Hernandez de Cos said on Wednesday, as reported by Reuters.

Additional takeaways

“Must avoid a premature rise in nominal rates.”

“Drop in real rates would make a greater contribution to recovery given low inflation expectations.”

“Need to maintain very favourable financing conditions as the eurozone is a long way from inflation aim.”

“Contraction in some eurozone countries or sectors cannot be ruled out if additional health crisis containment measures endure.”

“Long-term interest rates developments must also be analysed alongside developments in rest of yield curve.”

“Must monitor exchange rates even as upward pressure on euro has eased.”

“ECB should set a new inflation target at 2% with symmetry.”

Market reaction

The EUR/USD pair continues to edge lower following these remarks and was last seen trading at 1.2063, losing 0.21% on a daily basis.