ECB's de Cos: Prolonged period of low interest rates could threaten financial stability
Comments by ECB governing council member, Pablo Hernandez de Cos
- September stimulus package is to support reaching inflation objective
- But maintaining low interest rates for longer could hurt banking transmission channels of our monetary policy
I think that is the real dilemma faced by the ECB at the moment and why deepening negative rates next year may be a bit troublesome.
Much like Japan, the squeeze will be on the banks but considering how fragile the banking sector is in Europe - especially in periphery nations like Italy and Spain - it presents a real problem if there is a real threat of them going belly up.