Jamie Dimon says JPMorgan has stockpiled $500 billion in cash that it will look to invest as inflation picks up

Jamie Dimon, CEO of JPMorgan Chase, speaks about investing in Detroit during a panel discussion at the Kennedy School of Government at Harvard University in Cambridge, Massachusetts, U.S., April 11, 2018.
JPMorgan CEO, Jamie Dimon.

JPMorgan chief executive Jamie Dimon said on Monday the investment bank is sitting on $500 billion in cash in anticipation of higher inflation.

It has been “effectively stockpiling more and more cash” in anticipation of investing at higher rates rather than putting money into Treasuries and other investments now, he said at Morgan Stanley’s US Financials, Payments & Commercial Real Estate Conference.

“We have a lot of cash and capability and we’re going to be very patient, because I think you have a very good chance inflation will be more than transitory,” Dimon, the longest-serving CEO among the big US banks, said.

He suggested the risk of higher, more persistent inflation is growing. US inflation, or the rise in prices of goods and services, has picked up dramatically compared with last year, when the economy was in lockdown. Disruptions to the global supply chain and a burst of consumer spending have added to the increase. Higher interest rates would help ward off a more damaging pickup in inflation.

“If you look at our balance sheet, we have $500 billion in cash, we’ve actually been effectively stockpiling more and more cash waiting for opportunities to invest at higher rates,” he said. “I do expect to see higher rates and more inflation, and we’re prepared for that.”

While several Fed officials have been resolute in their view that the rise in inflation will ultimately prove transitory, other influential leaders have warned of the consequences of rising prices.

In a 1980 shareholder letter, Warren Buffett described high inflation as a “tax on capital” that dissuades corporate investment. The billionaire investor said the rise in general price levels can hurt more than income tax, and rising costs force companies to spend cash just to maintain their business – regardless of whether they’re generating profits.

JPMorgan, the largest US bank by assets, expects $52.5 billion in net-interest income in 2021, down from its previous expectation of $55 billion, partly due to a decline in credit card balances.

Separately, at Monday’s conference, Dimon said he planned to hold his position at JPMorgan for at least the next two to three years. Without giving an exact time frame, he said: “I intend to stay, which is sanctioned by the board, for a significant amount of time.”

Read More: Goldman Sachs says buy these 37 stocks that will offer strong returns with minimal risk through year-end as growth names regain leadership

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US futures inch lower for fourth day as investors digest Fed minutes, while bitcoin rebounds after crypto crash

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US stock index futures inched lower on Thursday morning.

US stock index futures inched lower for a fourth day on Thursday after equities fell in the previous session amid concerns the Federal Reserve might cut back on support for the economy sooner than expected and as cryptocurrency markets crashed.

Bitcoin rebounded somewhat after falling as much as 30% on Wednesday in the wake of Tesla’s U-turn on payments and a decision by China to crack down on the token’s use.

S&P 500 futures slipped 0.15% Thursday after the index fell for the third consecutive day on Wednesday. Dow Jones futures were down 0.22% but Nasdaq 100 futures were up 0.05%.

European stocks rebounded from sharp falls on Wednesday, when fresh concerns about the economic recovery and the actions of central banks came to the fore. The continent-wide Stoxx 600 was 0.5% higher.

In Asia, China’s CSI 300 closed 0.27% higher overnight, while Japan’s Nikkei 225 eked out a 0.19% increase.

Markets had a rocky day on Wednesday, with US stocks falling sharply before rebounding to close only slightly lower.

The release of the minutes from the Fed’s last interest rate meeting unnerved investors. A single line showed the central bank had discussed the possibility of eventually starting to talk about cutting back on bond purchases as growth and inflation pick up.

“A number of participants suggested that if the economy continued to make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,” the minutes said.

US bond yields, which move inversely to prices, jumped as investors digested the minutes. The yield on the key 10-year US Treasury note rose as high as 1.692%, after starting the week at around 1.63%. Yet it slipped back to 1.661% on Thursday.

Analysts were not entirely sure how to interpret the Fed minutes, causing gyrations in stocks. Jeffrey Halley, senior market analyst at trading platform Oanda, said the minutes “restored a sense of order” by confirming that the Fed remained committed to its ultra-loose monetary policy for the foreseeable future.

Yet Jim Reid of Deutsche Bank said they showed Fed policymakers “have indeed talked about talking about tapering.”

Many investors are highly concerned that rising inflation will erode the value of their portfolios. They are equally as concerned that it will force the Fed and other central banks to reduce their support for the economy, weighing on stocks and growth.

In a sign that investors are becoming wary of high asset prices, bitcoin plunged as much as 30% to $30,000 on Wednesday following a breakneck rally in the first months of 2021 that took the price near $65,000 in April.

The digital asset rebounded later in the day and continued to claw its way higher on Thursday, rising 4.2% to $39,949.

Bitcoin’s rapid multi-day slide was triggered by Elon Musk saying Tesla would no longer accept it as payment for cars due to its “insane” energy use. But the catalyst for Wednesday’s crash was a move by Chinese regulators to step up their pressure on the token’s use.

Analysts said the crypto crash made itself felt across the wider market. “Typically, moves in the crypto arena are rather isolated,” Michael Brown, senior market analyst at Caxton FX, said. “Yesterday, though, was different, with the sell-off in the crypto arena sparking some notable risk aversion elsewhere.”

Brown added: “This ripple effect seems to be a strong illustration of how large crypto markets have become; the correlation between these assets is, at least intraday, fairly clear to see.”

Oil prices also tumbled on Wednesday as investor confidence fell. But Brent crude had steadied on Thursday and rose 0.11% to $66.72 a barrel, while WTI crude climbed 0.32% to $63.53 a barrel.

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Billionaire investor Bill Ackman warned of inflation, discussed bitcoin, and explained why he’s staying in New York City in a recent interview. Here are his 12 best quotes.

Bill Ackman
  • Bill Ackman said inflation won’t be temporary and the economy is at risk of overheating with interest rates this low.
  • The hedge fund billionaire also said cryptocurrency is “fascinating” but he’s not comfortable investing in bitcoin.
  • Ackman also revealed his fund recently acquired a 6% stake in Domino’s.
  • See more stories on Insider’s business page.

Billionaire investor Bill Ackman warned inflation may not be temporary and said the Federal Reserve may have to raise interest rates in a Wednesday interview at the Wall Street Journal Future of Everything Festival. The Pershing Square Capital Management founder also revealed that his fund recently purchased a 6% stake in Domino’s Pizza, sending the shares up as high as 5.9% Wednesday.

Here are 12 of Ackman’s best quotes from the interview, lightly edited and condensed for clarity:

1. “We’ve admired it for years, and it was just never cheap enough. And then for about five minutes, it got cheap. I don’t know who sold or why, but we started buying around $330 a share, and then very quickly it moved up a lot,” on his decision to buy a 6% stake in Domino’s pizza during the pandemic.

2. “The surprise numbers that came out are not due to any weakness in the economy. The economy is crushing it. Businesses are booming. If you think about hospitality, you can’t get a reservation in New York anymore,” on the jobs report that badly missed estimates last week.

3. “There are plenty of jobs, people haven’t had to work partially because of the stimulus…When unemployment benefits step back and some of the stimulus wears off, there will be more of a supply of labor.” He added that raising wages is good for workers and the economy because workers will spend money.

4. “They’ve got a great product, a great value where they do have pricing power. And so they’re able to offset the incremental costs of paying higher wages with charging a little bit more for a burrito. You charge 50, 60, 70 cents more for burrito, you can pay your workers more, and it’s still very good value to consumers. The key in a world where there’s going to be inflation and there’s going to be wage inflation is to have a business that sells a product where there’s pricing power,” on Chipotle raising wages. (Ackman’s Pershing Square owns Chipotle stock.)

5.”I think it’s not temporary….Look at every commodity price right? Copper, lumber, energy even before the colonial pipeline issue. Look at housing prices, look at Bitcoin right? Everything is inflating. That’s driven by a once in a moment history. People are emerging from a pandemic with the endless spirit that comes from being locked up,” on inflation.

6. “I think they’re going to have to raise rates for sure. And I think they adjusted their policy just at the wrong time. Preemptive policy toward inflation I think is a better approach, particularly in a world where we have massive, massive economic stimulus,” on The Federal Reserve.

7. “I think with rates where they are, there’s a very good risk of the economy overheating.”

8.”I think crypto is a fascinating phenomenon. I think it’s a brilliant technology and I kick myself for not understanding it, it’s one of the best speculations ever… But it’s not a place where I would feel comfortable personally putting any meaningful amount of assets in. Therefore I wouldn’t invest our firm’s assets.”

9.”There’s no intrinsic value. Intrinsic value to me is driven by cash generation. You have to be able to build a discounted cash flow calculation,” on why he’s not comfortable investing in bitcoin.

10. “I would be concerned if a friend had a lot of their net worth invested in, in one or more cryptocurrencies, I’d want them to take some money and put it into something a little more durable.”

11. “New York is an extremely desirable place to live. It is a big tax burden and when high-income people do the math and they say, well, I could move to Florida and buy this amazing house and not the state taxes, it motivates some people, but…One of the benefits of being successful is you can choose where you live. So to run away from a location because the tax rate is higher, it seems kind of silly,” on the migration from New York to Miami and his decision to keep Pershing Square in Manhattan.

12. “I think it’s very, very important who the next mayor of New York is, and that we actually have a pro-business mayor. The mayor of Miami has done a great job recruiting technology executives. The next mayor of New York has to do the same thing.” He added that Raymond McGuire and Andrew Yang are both great candidates for mayor.

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Bank of England boosts 2021 UK growth forecast to 7.25% in wake of successful vaccine rollout

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The Bank of England kept interest rates on hold.

The Bank of England sharply upgraded its forecasts for the UK economy on Thursday, citing the successful rollout of coronavirus vaccines and a sharp drop in COVID cases.

Policymakers at the Bank kept interest rates at the record-low level of 0.1% and maintained the size of its bond-buying package, through which the BoE injects money into the economy, at £895 billion ($1.25 trillion).

The BoE predicted UK gross domestic product will grow 7.25% in 2021, considerably higher than its February estimate of 5% growth. UK GDP contracted 9.8% in 2020, the worst slump out of the G7 countries.

The Bank said the unemployment rate should now peak at just under 5.5% in the third quarter of 2021, down sharply from an earlier estimate of a 7.75% peak. And it said UK GDP should recover its pre-pandemic level towards the end of 2021, earlier than previously expected.

“New COVID cases in the United Kingdom have continued to fall, the vaccination programme is proceeding apace, and restrictions on economic activity are easing,” the bank said in its monetary policy statement.

The central bank’s monetary policy committee (MPC) said that while the overall size of its quantitative easing (QE) program would remain the same, the weekly pace of its purchases would slow somewhat.

Thomas Pugh, UK economist at consultancy Capital Economics, said this move was not due to the strength of the economy. “The MPC has always said that it aimed to finish the £150 billion of QE announced last November ‘around the end of 2021’, so the pace of asset purchases was always going to slow at some point,” he said.

The UK has achieved one of the fastest vaccine rollouts in the world, with 51% of the population having received at least one dose by May 4, according to Our World In Data. That compared to 63% in Israel and 44% in the US.

Business and consumer confidence has picked up, as coronavirus cases have fallen following strict lockdowns in January and February and the government has gradually reopened the economy.

On the topic of inflation, which has unnerved financial markets in recent months, the Bank said it expected a short-term spike followed by a fall. It said year-on-year inflation is expected to rise above the Bank’s 2% target towards the end of 2021 before returning to around 2% in the medium term.

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Billionaire investor Leon Cooperman blasted stimulus efforts, flagged a bond bubble, and warned of a brutal market crash in an interview this week. Here are the 11 best quotes.

Leon Cooperman
Leon Cooperman.

  • Leon Cooperman criticized the federal government for pumping up the US economy.
  • The billionaire investor said low interest rates and stimulus are pushing investors to take risks.
  • The Omega Advisors boss warned of a brutal market crash once conditions worsen.
  • See more stories on Insider’s business page.

Leon Cooperman blasted the federal government for juicing a booming economy, predicted rising inflation will prompt an interest-rate hike next year, and warned markets will nosedive once sentiment shifts during a Bloomberg Surveillance interview this week.

The billionaire investor and Omega Advisors chief also blamed the Federal Reserve for investors taking greater risks, highlighted a bubble in the bond market, and questioned the need for greater regulation of family offices.

Here are Cooperman’s 11 best quotes from the interview, lightly edited and condensed for clarity:

1. “It’s the advance of greed basically. The fact that the industry would get into the same predicament again is kinda surprising. The more things change, the more they remain the same.” – comparing the recent collapse of Archegos Capital, which sparked over $10 billion of losses for the banks that lent it money, to Long-Term Capital Management blowing up in the late 1990s.

2. “I’m a retired money manager living on investment income. I run my own money. Why they have the right to regulate me is beyond my wildest dreams.” – questioning the SEC’s plans to increase oversight of family offices.

3. “I describe myself as a fully invested bear.” – Cooperman explained he doesn’t currently see the factors that cause bear markets such as accelerating inflation, a hostile Federal Reserve, and recession fears, but he expects the backdrop to change.

4. “The biggest plus out there is the Fed has created an environment where there’s an absence of alternatives.” – arguing that near-zero interest rates have pushed investors into riskier assets such as high-yield bonds, stocks, and cryptocurrencies.

5. “We are borrowing from the future. Interest rates shouldn’t be where they are, and we should not be injecting so much fiscal stimulus when the economy is growing off the charts.”

6. “The market’s gonna be surprised because the Fed will raise rates sometime in 2022. They’ll be forced to by inflation.”

7. “Everything I look at would suggest caution, intermediate to long term, would be the rule of the day.”

8. “On NFTs, bitcoin, stuff like that – I’m too old. I don’t understand that stuff, it’s crazy to me, it makes no sense. I’m a meat-and-potatoes guy, a stocks guy.”

9. “The bubble is not so much the stock market, the bubble is the bond market.”

10. “They’re not cheap stocks, but they’re not expensive stocks. Nothing is expensive if interest rates stay here.” – commenting on “big tech” stocks and echoing Warren Buffett.

11. “When this market has a reason to go down, it’s gonna go down so fast your head’s gonna spin.”

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Biden breaks with Trump and says he’ll stick up for Federal Reserve’s independence

Trump Biden
  • Biden said he wanted to break with Trump in sticking up for the Federal Reserve’s independence.
  • “I want to be real clear that I’m not going to do the kinds of things that have been done in the last administration,” Biden said.
  • While he was in office, Trump pressured Fed Chair Powell against raising interest rates.
  • See more stories on Insider’s business page.

President Joe Biden said on Tuesday he would safeguard the independence of the Federal Reserve, breaking with his predecessor, Donald Trump, who often tried pressuring the central bank to lower the cost of borrowing.

“Starting off my presidency, I want to be real clear that I’m not going to do the kinds of things that have been done in the last administration – either talking to the attorney general about who he’s going to prosecute or not prosecute … or for the Fed, telling them what they should and shouldn’t do,” he said at a White House news conference.

“I think the Federal Reserve is an independent operation,” he said, adding he does speak with Treasury Secretary Janet Yellen. The Treasury did not immediately respond to a request for comment.

The remarks reflect another way that the president is distancing himself from his predecessor by preserving the Fed’s traditional independence from the White House. Trump heaped criticism onto Powell throughout his term, assailing him as “an enemy of the state” and a “terrible communicator” from his now-suspended Twitter account.

Trump furiously tried pressuring Powell from raising interest rates while the economy was in the middle of its longest expansion in history in the years leading up to the pandemic. At one point, he suggested Powell may be a “bigger enemy” of the US than China.

Powell played a critical role designing the Fed’s stimulus programs as vast swaths of the economy shut down last year. He also encouraged Congress to continue approving more federal aid for struggling individuals, small businesses, and state and local governments.

“Given the low level of interest rates, there’s no issue about the United States being able to service its debt at this time or in the foreseeable future,” he told NPR recently. Powell, a Trump nominee, has also downplayed the inflation risks stemming from the $1.9 trillion stimulus package.

Powell’s term as Fed chair expires in 2022, and Biden must decide whether to keep him onboard.

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The Fed will be forced to buy more bonds as US stimulus drives up interest rates, Ray Dalio says

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The ‘king of hedge funds’ Ray Dalio had a nightmarish 2020

  • The Federal Reserve will be forced to increase its quantitative easing program by buying more bonds as interest rates continue to rise, according to Ray Dalio.
  • Dalio believes the recent $1.9 trillion fiscal stimulus bill will spur more treasury offerings by the US government, further damaging the “supply/demand problem for bonds,” Dalio said.
  • In its most recent Fed meeting, chairman Jerome Powell said its current monetary policy is appropriate.
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The Federal Reserve is going to have to revamp its quantitative easing program and buy more bonds to help limit the rise in interest rates, according to hedge fund billionaire Ray Dalio and first reported by Bloomberg.

In a Saturday panel at the China Development Forum, Dalio said the recently passed $1.9 trillion COVID-19 stimulus bill will lead the US government to raise more money by issuing more treasury bonds, further worsening the “supply/demand problem for the bonds.”

That supply and demand problem for bonds will lead to a further rise in interest rates, which has already wreaked havoc on certain parts of the stock market like the high-growth technology sector as the 10-year Treasury yields climbed to a pre-pandemic high of 1.75% last week.

A continued rise in interest rates “will prompt the Federal Reserve to have to buy more [bonds], which will exhibit downward pressure on the dollar,” Dalio said. The Fed already buys about $120 billion in bonds per month.

In a dire scenario, Dalio explained that the world is “very overweighted in bonds” that have a negative yield, and that “not only might there be not enough demand, but it’s possible that we start to see the selling of those bonds,” according to Bloomberg.

According to Bank of America, there is currently $13.7 trillion in negative yielding debt. In the event that bonds are liquidated by investors, “that situation is bearish for the dollar,” according to Dalio.

Despite the concerns, Fed Chairman Jerome Powell said last week that its current monetary policy is appropriate, and pushed back against the idea that the recent jump in interest rates pose a problem to the economy.

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The Fed’s inflation expectations are ‘optimistic’ and inflation could hit 2.75% by year-end, former Fed special adviser Andrew Levin says

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Fed chair Jerome Powell.

  • Former Federal Reserve special adviser Andrew Levin says inflation could hit 2.75% by year-end.
  • The Dartmouth Economics Professor added that he believes the Fed’s inflation targets are “optimistic.”
  • Levin called the Fed’s Wednesday remarks “a little stale” and said six month annual core PCE inflation is already above 2%.
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The Federal Reserve’s inflation expectations are “optimistic” as inflation could hit 2.5% or even 2.75% by the end of 2021, according to Andrew Levin, a former Federal Reserve special adviser.

Levin sat down with Yahoo Finance on Wednesday after the Federal Reserve meeting to discuss recent announcements.

The Federal Reserve announced on Wednesday that it will maintain target interest rates at near-zero levels and reiterated its commitment to quantitative easing, as well as aggressive asset purchases.

It also revealed it believes the unemployment rate will fall to 4.5% by the end of this year with inflation reaching 2.2%. Just three months ago the Fed predicted an unemployment rate of 5.0% by the end of 2021 and inflation not touching 2% until 2023.

Former Federal Reserve special adviser and current Dartmouth economics professor Andrew Levin said that chairman Powell and the US central bank may be optimistic when it comes to their expectations for low inflation.

“The statement [the Federal Reserve] issued at two o’clock is a little stale. It says that inflation is still running below 2%. The truth is the six-month annual rate of core PCE inflation is already above 2%. So the 2.2% projection for the year as a whole is somewhat optimistic,” Levin said, referring to personal consumption expenditure, which is the broadest set of inflation data tracked by the Fed.

The former Federal Reserve special adviser added that if inflation continues to pick up steam “we could be looking at 2.5% or even 2.75% core inflation.”

Levin said the Fed needs to be clear in communicating how high inflation should be allowed to go if the economy continues to recover, and they should have “contingency plans” in case of a slow down.

Levin’s comments may cause additional anxiety among hedge fund managers, who now believe inflation is the top “tail risk” facing the stock market, according to a Bank of America fund manager survey.

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Why the spiking bond yields driving sharp losses in tech stocks are not a long-term threat to the market, according to one Wall Street chief strategist

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  • Rising interest rates have sparked a surge in stock-market volatility that’s seen tech shares take a sharp dive.
  • But investors should not fear rising interest rates, according to a recent client note from The Leuthold Group.
  • “Yields may be rising, but yield pressure is still extremely low because real growth is improving even faster,” said Jim Paulsen, the firm’s chief investment strategist.
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A spike in interest rates since the start of the year has accelerated a rotation out of high-growth technology stocks and into value stocks poised to benefit from a reopening of the economy.

The Nasdaq has fallen more than 10% over the past month as the Dow has soared to record highs, with a spike in the 10-year US Treasury yield acting as the main catalyst. It recently surged to a cycle high of more than 1.60% after starting the year below 1%.

But according to Jim Paulsen, the Leuthold Group’s chief investment strategist, rising interest rates do not represent a long-term threat to the stock market. Paulsen expects the 10-year yield to cross 2% by the end of the year.

A spike in interest rates and its impact on the stock market depends on the economic backdrop, according to Paulsen. Rising interest rates amid a strengthening economy “may prove no challenge at all for stocks,” Paulsen said.

Since 1950, the S&P 500 achieved an average annualized price return of 9% during quarter when interest rates were on the rise, according to the note. “The effect of rising-yield quarters is probably not that much worse because real economic growth also improved for many of these quarters,” Paulsen explained.

With COVID-19 subsiding and the full reopening of the economy imminent, economists are expecting 2021 GDP growth to surge to 5.5%. This represents a favorable backdrop for the stock market even if interest rates continue their ascent.

If the pace of economic growth slows in 2022, the stock market will become much more sensitive to rising interest rates.

But for now, “with the economy enjoying a post-pandemic boom, rising yields may prove far less damaging for stock investors in 2021,” Paulsen concluded.

Read more: UBS says to buy these 13 ‘most compelling’ contrarian stocks that are poised to surge, including one with 40% upside – and shares what could drive each one higher

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Christine Lagarde calls rising bond yields ‘undesirable’ as ECB steps up purchases to soothe the market

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Christine Lagarde said rising bond yields could start to weigh on the recovery

  • Christine Lagarde said the ECB was concerned rising bond yields could weigh on the recovery.
  • The ECB said it would step up the pace of bond purchases to try to support lending in the economy.
  • Rising bond yields have worried markets in recent weeks – but European yields fell after the decision.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

European Central Bank chief Christine Lagarde said on Thursday the recent rise in bond yields could have an “undesirable” impact on the economic recovery, after the ECB announced it would ramp up the speed of its asset purchases to try to calm the market.

The Eurozone’s central bank left its coronavirus bond-buying envelope at 1.85 trillion euros ($2.21 trillion) and its key interest rate at -0.5%. But it said it would “significantly” step up the pace of its purchases within the asset-buying scheme over the next three months.

Lagarde said in a press conference after the decision that the ECB was responding to a rise in “market interest rates” including bond yields, which have climbed rapidly in recent weeks and weighed on market confidence.

“If sizeable and persistent, increases in these market interest rates, when left unchecked, could translate into a premature tightening of financing conditions for all sectors of the economy,” she said.

“This is undesirable at a time when preserving favourable financing conditions still remains necessary to reduce uncertainty and bolster confidence, thereby underpinning economic activity.”

The ECB’s increase in the rate of bond purchases aims to tackle rising market interest rates by increasing demand for securities. Bond yields move inversely to prices.

European bond yields dropped following the announcement, with the yield on the 10-year German bond falling 1.9 basis points to -0.332%. The Italian 10-year yield fell 9.4 basis points to 0.592%.

Rising bond yields have unnerved markets in recent weeks and triggered a sharp sell-off in equities, particularly tech stocks that soared when yields were low.

Stronger expectations of growth and inflation, thanks to the rollout of vaccines and fiscal stimulus, have pushed yields sharply higher. Stronger inflation erodes the return on bonds, making investors demand a higher yield.

US Federal Reserve Chair Jerome Powell has said rising bond yields are a result of a brighter economic outlook, and that the central bank plans to keep policy steady for the time being.

But policymakers in Europe have appeared more concerned, in part because the Eurozone’s recovery is expected to be more fragile than that of the United States.

“The just-released statement suggests that the ECB is trying to demonstrate its willingness to put a cap on bond yields without showing signs of panic,” Carsten Brzeski, global head of macroeconomics at Dutch bank ING, said in a note.

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