European Central Bank Executive Board member Isabel Schnabel expressed the view on Wednesday that we may now be facing a turning point in real interest rates. She added that the exceptional investment needs, arising from structural challenges related to the climate transition, digital transformation and geopolitical shifts, may have a persistent positive impact on the natural rate of interest.
The official also suggested that the impact of monetary policy actions and communication on real long-term rates may be stronger than conventionally assumed, so the policymakers need to tread carefully. "Rather than looking to financial markets, which could just be a mirror of ourselves, we need to thoroughly examine whether the fundamental forces driving the economy over the long run have changed, and communicate these views prudently," she emphasised.