MNI BRIEF: Real Interest Rates Have Risen - ECB's Escriva
MNI (ROME) - Real interest rates have increased as inflation has decreased, adding to the degree of monetary tightening, Bank of Spain Governor Jose Luis Escriva said in a presentation on Friday.
The fact that disinflation in the euro area has not produced a rise in unemployment suggests a “non-linear Phillips Curve,” the presentation said in a page entitled "Monetary Policy: are we at the last mile or the last yard?", which pointed to labour shortages and a rise in the frequency of price adjustments. (See MNI BRIEF: EZ Inflation Data Suggests Downside Surprise For ECB )
“A closing policy gap with the U.S, may impact exchange rates via appreciatory pressures,” the presentation said, adding that in an environment with anchored inflation expectations and a weakening economic outlook, the last yard could be slower. (See MNI INTERVIEW: ECB Likely To Hold In October - Gonzalez-Paramo)