MNI BRIEF: QT Sends Long Rates Higher, ECB Blog Says
MNI (ROME) - A EUR1 trillion reduction in the European Central Bank’s bond holdings portfolio could increase long-term risk-free interest rates in the euro area by approximately 35 basis points, with Italian and Spanish bonds seeing rises of 45 and 50 basis points respectively, according to estimates published by the ECB in a blog on Thursday, based on its Survey of Monetary Analysts.
The blog draws on analysts’ expectations for long-term interest rates and ECB policy rates, using data collected from December 2022 to December 2023.
The findings suggest that “the estimated impact of QT on long-term interest rates is comparable in scope to the inverse effects of QE found in previous studies” but in the opposite direction. Previous research indicated that each EUR1 trillion increase in QE could reduce ten-year rates by between 35 and 65 basis points.