Christine Lagarde calls rising bond yields ‘undesirable’ as ECB steps up purchases to soothe the market

Christine Lagarde calls rising bond yields ‘undesirable’ as ECB steps up purchases to soothe the market

European Central Bank chief Christine Lagarde said on Thursday the recent rise in bond yields could have an "undesirable" impact on the economic recovery, after the ECB announced it would ramp up the speed of its asset purchases to try to calm the market.

The Eurozone's central bank left its coronavirus bond-buying envelope at 1.85 trillion euros ($2.21 trillion) and its key interest rate at -0.5%. But it said it would "significantly" step up the pace of its purchases within the asset-buying scheme over the next three months.

Lagarde said in a press conference after the decision that the ECB was responding to a rise in "market interest rates" including bond yields, which have climbed rapidly in recent weeks and weighed on market confidence.

"If sizeable and persistent, increases in these market interest rates, when left unchecked, could translate into a premature tightening of financing conditions for all sectors of the economy," she said.

"This is undesirable at a time when preserving favourable financing conditions still remains necessary to reduce uncertainty and bolster confidence, thereby underpinning economic activity."

The ECB's increase in the rate of bond purchases aims to tackle rising market interest rates by increasing demand for securities. Bond yields move inversely to prices.

European