ECB Governing Council member Fabio Panetta said that a jump in bond yields will dampen the region's economy, but this is not serious as far as the current situation is concerned. Speaking in Turin, the governor of the Bank of Italy said that the trend in the bond market is a global phenomenon. The past week was mainly led by the US, where economic growth and inflation both exceeded expectations. “The problem is that in the US, rising interest rates have been accompanied by stronger growth, while growth in Europe has not been as strong,” he said on Wednesday. “It's not a crisis, but it does drag down growth.” Like other ECB officials, Panetta warned that a tightening financial environment could limit economic expansion, although this slowdown could also help curb inflation. Soaring energy costs have propelled the Eurozone's inflation rate to nearly double the 2% target. ECB policymakers are expected to keep interest rates unchanged next week. They are currently in a week-long period of silence before the meeting, during which time they cannot comment on monetary policy. In the Eurozone, which consists of 21 countries, market pressure is mainly concentrated in France, which is the second-largest member of the Eurozone, struggling to put public finance on a sustainable path. Panetta said German bond yields increased less due to a more stable public finance situation. In particular, he pointed out that France's public debt and budget deficits continue to be high, and said that sovereign debt tension may affect Italy's borrowing costs. “When long-term US interest rates rise, we'll see this spill over to other markets, including Europe,” Panetta said. “This will also affect the cost of financing in Italy.”

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