ECB Has Room to Boost Bond Purchases to Temper Yields

(Bloomberg) -- After increasing the envelope of its pandemic emergency purchase program to 1.85 trillion euros ($2.2 trillion) in December, the European Central Bank has enough space to increase bond purchases in order to limit upward pressures on yields. Dialing up its purchases now would help confirm the ECB’s reaction function. Bloomberg Economics anticipates ECB President Christine Lagarde next week will draw attention to the risk of premature tightening linked to unwarranted rises in risk-free rates and sovereign-bond yields, and signal a willingness to increase weekly purchases to dampen the move.

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