German Policy Maker Warns on Low Rate Driven Bubbles

Record low interest rates from central banks could lead to dangerous asset bubbles, Andreas Dombret, a member of the executive board of the Deutsche Bundesbank told CNBC.

Since the financial crisis of 2008, central banks around the globe have opted to reduce benchmark interest rates in order to stimulate cash flow into the real economy. While many doubt whether these measures have yet to be felt in the real economy, with more businesses and households spending, Dombret believes that this expansionary monetary policy would cause problems if it goes on for too long.

“If we were to continue this very low interest environment over a long period of time. Experience in other countries has shown that this may well lead to bubbles,” he told CNBC Friday. “We have never had a real real estate bubble in Germany, so we don’t really have that experience with real estate bubbles. This is why we are watching this very closely.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza