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ECB's Schnabel says rise in nominal yields may be welcome

FILE PHOTO: Isabel Schnabel, member of the German advisory board of economic experts attends the 29th Frankfurt European Banking Congress (EBC) at the Old Opera house in Frankfurt, Germany November 22, 2019. REUTERS/Ralph Orlowski/File Photo

FRANKFURT (Reuters) - A rise in nominal bond yields in the euro zone would be welcome if it is accompanied by higher inflation expectations, showing that the European Central Bank’s anti-pandemic stimulus is working, ECB policymaker Isabel Schnabel said on Friday.

“For example, a rise in nominal yields that reflects an increase in inflation expectations is a welcome sign that the policy measures are bearing fruit,” Schnabel said.

“Even gradual increases in real yields may not necessarily be a cause of concern if they reflect improving growth prospects.”

She reaffirmed, however, that higher long-term real yields, which are adjusted for inflation, in the early part of an economic recovery may choke growth and would warrant a reaction by the ECB.

Reporting By Francesco Canepa; editing by Balazs Koranyi