European Central Bank (ECB) is aware with the increasing cost of ultra-easy monetary policy for the financial sector and will not held negative interest rates for too long, according to the president of the institution Mario Draghi. But he said that there are no risks for the financial stability, arising from the low interest rates and high liquidity.
In his speech in Berlin, Mario Draghi defended the ECB’s policy of aggressively buying bonds and lower interest rates, by accusations that led to higher inequality. He also said that takes into account complaints from the banks, especially in Germany, that low interest rates eat up profits.
“We would prefer not to hold interest rates low for long time, as undesirable side effects can build up over time”, said Mario Draghi. “The record low interest rates in the Eurozone are not new normality, although monetary union will remain vulnerable without full monetary and banking union. We will come out of these measures, when achieving price stability in a sustainable manner without today’s extraordinary monetary support”, added he.
The low interest rates are a symptom of the very weak investment and excessive savings, which central banks should consider. They support demand and employment – benefits that are always socially progressive. Overall, a more rapid return to full employment in return would contribute to less inequality future.