ECB: Interest rates to remain low until inflation goal is reached

Chief economist of the European Central bank (ECB) Peter Praet made it clear that the central bank would retain low interest rates until the inflation goals set by the ECB were met, despite complaints by EU commercial banks that there profit margins were extremely low. Criticism against the low interest rate policy adopted by the ECB was particularly strong from Germany, where banks have high liquidity and competition is fierce in the industry. Even though the ECB executive board member acknowledged the justifiable complaints raised by the banks, he insisted that the ECB would pursue its quantitative easing policy until inflation had fallen below the 2% threshold. Praet added that the ECB would closely monitor the EU banking sector and its robustness, noting that a period of prolonged low interest rates would adversely affect the banks’ ability to loan out money and there profits. The ECB official claimed, however, that monetary policy was not the key to restoring profit margins in the banking sector, but mainly depended on a swift banking unification accompanied by the implementation of necessary adjustments in the sector through the adoption of efficient business plans and the curtailment of costs.