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.”
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