The European Central Bank still has room if needed to lower interest rates before they start having an adverse impact on the economy and consumer behavior, Executive Board member Benoit Coeure said on Thursday.
“Monetary developments in the euro area show no signs of cash substitution, indicating that we are still far away from the physical lower bound,” Coeure said in the text of a speech in New Haven, Connecticut. “Central bankers should, however, be mindful of a potential ‘economic lower bound,’ at which the detrimental effects of low rates on the banking sector outweigh their benefits, and further rate cuts risk reversing the expansionary monetary policy stance.”
