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- ECB's Knot says low rate policy risks becoming counterproductive
ECB's Knot says low rate policy risks becoming counterproductive
Interest rates in the euro zone could remain historically low for years, but the European Central Bank's (ECB) ultra-loose monetary policy risks becoming counterproductive, ECB governing council member Klaas Knot said.
"I do not have a crystal ball, but I cannot rule out that the current low interest rate environment could last another five years", Knot told Dutch newspaper De Volkskrant.
"This worries me, because temporarily low interest rates are something quite different from persistently low interest rates."
The Dutch central bank president said the current low rates lead to excessive risk taking among investors, while younger generations on the other hand might feel forced to keep increasing their savings.
"From a macro-economic perspective that would be undesirable," Knot said. "And it is also an example of how our low interest rate policy may eventually shoot itself in the foot. If people start saving more in response to the low interest rates, this will add further downward pressure on inflation."
"The balance between positive and negative effects of the low interest rates is shifting in the wrong direction", he told the paper.
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