ECB's Lane shrugs off bond selloff since Trump's win

November 11, 2016 8:33 AM EST

Philip Lane, Governor of the Central Bank of Ireland speaks at a Reuters Newsmaker event in London, Britain October 28, 2016. REUTERS/Toby Melville


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DUBLIN (Reuters) - European Central Bank rate setter Philip Lane shrugged off a selloff in euro zone government bonds since Donald Trump won the U.S. presidential election, playing down the significance of "day-by-day" market moves for ECB policy.

Bond yields have surged since Trump's victory, a potential problem for the ECB, which is trying to lower borrowing costs in the euro zone to stimulate lending with an ultra-easy monetary policy.

But Lane said market prices would be just one of several factors the ECB's policy makers review when they meet on Dec. 8 to decide on the future shape and duration of their 80 billion euros ($87.17 billion) monthly bond-buying program.

"This day-by-day movement is not going to directly matter to us, but we're just going to assess what goes on and in early December we'll be looking at the market data and the updated forecasts," Lane, who is head of the Irish central bank, told reporters. "Monetary policy is not made on a day-by-day basis."

The ECB has been trying to revive euro zone growth and inflation via aggressive bond purchases, sub-zero rates and cheap loans to banks.

In theory, rising bond yields and market-based inflation expectations are good news for the ECB. They mean price growth may finally accelerate and alleviate concern about a scarcity of eligible bonds to buy in some countries.

But borrowing costs for more indebted euro zone countries, such as Italy, are rising faster than for safe-haven Germany. That suggests investors also fear a rise of anti-establishment sentiment before a key Italian referendum on Dec. 4 [GVD/EUR].

Lane said the ECB was in "monitoring mode" and it was too early to draw any conclusion on Trump's presidency.

"It's way too early to tell, we in the bank and across the euro system are in a monitoring mode, reviewing what's happening," he said.

"At this point, there's no hard information about what will be the nature of the regime. There's no real basis for any firm analysis."

Lane also said that the Irish Central Bank would announce any changes resulting from its first review of strict new deposit rules on mortgage lending introduced last year on November 23, following a meeting of its board.

(Reporting by Padraic Halpin; Writing by Francesco Canepa and William Schomberg; Editing by Larry King)



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