One risk is that low interest rates produce an illusion of sustainability, with the result that structural reforms and fiscal consolidation might end up being kicked further and further down the road. Another that springs to mind is the risk to financial stability because the low-interest-rate setting can lead to excesses in the financial and asset markets.
Low interest rates are also squeezing the earnings of banks, insurers, building and loan associations, pension funds, and so on. 4  BIS central bankers’ speeches  The results of a survey of 1,500 small and medium-sized banks released last week by the Deutsche Bundesbank and BaFin show that these institutions are struggling to cope with the low-interest-rate environment.