The ECB published its latest financial stability report on Wednesday and suggested debt sustainability concerns had increased over the past six months amid a possible uptick in yields.
“Risks to financial stability stemming from financial markets remain significant,” the Frankfurt-based institution said in its review. The ECB added a bond market re-pricing could “materialize via spillovers from higher yields in advanced economies, in particular, the United States.”
Policymakers at Europe’s central bank are poised to begin talks over the summer to discuss whether to taper its massive quantitative easing (QE) program. At present, the ECB’s asset purchases resume at a rate of 60 billion euros ($67 billion) each month.
Constancio stressed that, from his perspective, it would be best practice for the ECB to tread carefully when considering amending monetary support. However, some on the central bank’s governing council are more disposed to reining in QE given the strengthening economic growth in the region.
“If anything… if we have to err to (avoid) making a mistake, and I hope we don’t make a mistake, but if we have to err we should then err in the direction of being cautious,” he said.
