Reuters
Published Sep 15, 2021 09:21AM ET
Updated Sep 15, 2021 09:33AM ET
FRANKFURT (Reuters) - Real interest rates are puzzlingly low around the world, European Central Bank board member Isabel Schnabel said on Wednesday, arguing that investors may be overestimating the impact of the Delta variant of the coronavirus on the economy.
With governments and central banks unleashing record stimulus to revive growth after the pandemic, real rates on both sides of the Atlantic would be expected to rise, especially since stocks are soaring, Schnabel, the head of the ECB's market operations, said.
"The market may be overestimating the risks to the global growth outlook from the spread of the more contagious Delta variant," she said.
"Delta variant has many characteristics of a genuine supply-side shock, raising prices and lowering output," she added. "But market analysts’ growth expectations suggest that this shock is widely perceived as being short-lived."
Copious asset purchases by central banks also keep a lid on real rates but in case of the euro zone, the ECB's new strategy could be part of the explanation, she added.
The bank unveiled a new inflation target earlier this summer and made it clear that it would not tighten policy until it saw more decisive progress in boosting inflation, a hint that ECB policy will be ultra easy for years to come.
"This will imply a more patient reaction function," she said. "The market may have started internalising our new forward guidance, especially regarding the conditions that we need to see to start raising policy rates.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.