- warns that low interest rates have side effects that increase the longer they stay low
- deflation risk is very limited
- there is risk that govts and privatee sector get used to cheap money and neglect structural reforms
BUBA chief and ECB governing council member quoted on rtrs from a newspaper interview, so not exactly ground breaking time wise or mantra wise , but worth noting he says “very limited” risk of deflation rather than ruling it out completely
Euro a tad lower .
Add:
- traditional instruments are less effective when interest rates close to zero
- can’t rule out banks passing on costs of negative depo rates in loan costs
- sceptical of central banks trying to force banks to lend to certain sectors and regions
- if ECB does more LTRO’s then they should discourage banks from buying govt bonds as carry-trades
