Given the subdued medium-term inflation outlook, which is due to the weak macroeconomic backdrop and muted credit growth, the low interest rates are justified from a monetary policy perspective. Yet low interest rates are not without their side-effects.
While they are currently justified from a monetary policy perspective, we must not blind ourselves to reality: they tempt decisionmakers to delay reforms and necessary structural changes. Risks to financial stability may build up, and these side-effects will increase the longer the phase of low interest rates continues.