ATHENS – Interest rate increases could be gradual, Yannis Stournaras, the governor the Bank of Greece said on Monday. Addressing a seminar by the National Buraeu of Economic Research hosted by BoG, Stournaras said that the normalization policy of the European Central Bank (the termination of bond purchase programmes and an increase of interest rates) was a necessity following the rise in the inflation rate. However, he noted that this monetary policy adjustment towards normality could be gradual.

The central banker said that the ECB last week expressed its determination to deal with the tighter funding conditions and the risk of market fragmentation. He reiterated that the ECB will be flexible in the re-investment of bonds included in the PEPP portfolio in order to preserve the smooth transmision of monetary poicy throughout the Eurozone in the framework of ECB’s mandate for price stability. He said that the European Central Bank was also examining the creation of new tool to deal with any phenomena of bond market fragmentation in the eurozone.