Kazaks (ECB): It is not the job of the ECB to determine a country’s bond yields

The European Central Bank should not target specific levels of borrowing costs for eurozone governments, but simply ensure that interest rates are passed on to all 19 countries that use the euro, said Martins Kazaks, a member of the Bank.

In an interview with Reuters, Latvia’s central banker also backed the ECB’s interest rate hike by 75 basis points this summer, but said investors should not be fooled by speculation about further increases after that.

Financial costs have risen since the ECB announced earlier this month that it would double interest rates this summer and stop adding to the stock of bonds it has bought under its seven-year plans to boost economic activity. .

Days later, the ECB announced plans for a new market intervention tool, as the bond yield gap issued by the debtors Italy and Germany widened to a level that the Governor of the Bank of Italy said was unreasonably high.

Bond yields show how much a government may have to pay to sell new bonds.

Kazaks said it was not the job of the central bank to determine how much a country pays to borrow or to fix its structural problems.

“At the ECB, we are not targeting specific spread levels. But we are trying to ensure the right transition,” he told Reuters.

The ECB said last week that it would tackle fragmentation between eurozone countries with the new tool, which is likely to include new bond markets.

Sources told Reuters that any bond market should be accompanied by loose terms, such as compliance (recipient countries) with the Commission’s economic policy recommendations.