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Brussels, March 3 The European Central Bank (ECB) has the flexibility to react if it concludes that the recent increases in bond yields would have a negative impact on financing conditions, the bank's Vice President Luis de Guindos said.The ECB has recently seen an increase in yields, which is partly due to the expectation of higher inflation in the US following the new stimulus package, as well as the increase in commodity prices and the recovery in global demand, Xinhua news agency quoted de Guindos as saying to the Portuguese newspaper Publico on Tuesday."We will have to see whether this increase in nominal yields will have a negative impact on financing conditions. If we reach the conclusion that it will, then we are totally open to recalibrating our program including the envelope of our pandemic emergency purchase program (PEPP) if necessary," de Guindos said."We have room for manoeuver, and we have ammunition," he added.Rising government bond yields and fears over higher borrowing costs amid economic recovery have become a concern on global markets.ECB policymakers said on several recent occasions that they have been closely watching developments in bond yields.ECB President Christine Lagarde told a plenary session of the European Parliamentary Week on February 22 that the bank was "closely monitoring the evolution of longer-term nominal bond yields", noting it is an indicator of what happens at downstream stages of monetary policy transmission.De Guindos said in Tuesday's interview that he considers it a good sign that despite rising yields, the ECB has not seen an increase in yield spreads, which means the yield difference is not widening and the ECB program is working in terms of avoiding fragmentation.He said understanding the nature of the rises in yields and their impact will be a key factor over coming weeks and months for the monetary policy, noting that "one thing is clear: we have the flexibility that is needed in order to react".( With inputs from IANS )Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

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