Knot Says Low Interest Rates Aren’t Putting EU Economy at Risk

Low interest rates intended to help Europe emerge from recession aren’t creating risks of new bubbles, Dutch Central Bank Governor Klaas Knot said today.

“In Europe I’m not too concerned about the low interest rates,” Knot told reporters in Washington. He said the euro area is now out of recession, a positive step as it seeks to move past its financial and sovereign debt crisis.

Policy makers around the world need to weigh the advantages and disadvantages of monetary policy designed to spur recovery, he said.

“If we look at the United States, then there are some markets, the junk bonds and certain corporate bond markets where you can question where the pricing is in line with the relevant risks,” Knot said. “These are examples of cons of the monetary policy. But besides these cons, there are also pros of course.”

Knot declined to comment on what strategy the Federal Reserve should take as it weighs when to adjust its approach.

“I don’t comment on the monetary policy of our colleague, it should always go in that direction which is best for the stability of the American economy and the world economy,” Knot said.

To contact the reporters on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net; Corina Ruhe in Amsterdam at cruhe@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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