Bloomberg reports that Executive Board member Isabel Schnabel said that the European Central Bank may need to boost its monetary support for the economy if rising government borrowing costs hurt growth.
“A rise in real long-term rates at the early stages of the recovery, even if reflecting improved growth prospects, may withdraw vital policy support too early and too abruptly given the still fragile state of the economy. Policy will then have to step up its level of support,” she said.
Schnabel’s remarks add to a sense of concern from the ECB that the bond market threatens to stifle the euro region’s recovery even before it’s begun.
On Thursday, Chief Economist Philip Lane said the ECB will use the flexibility of its emergency bond-buying program to prevent any undue tightening in financial conditions.