In sum, they help to create the conditions which will allow us to normalise interest rates again. [1] Ampudia and Van den Heuvel, 2017. [2] Heider, Saidi and Schepens, 2017; de Sola Perea and Kasongo Kashama, 2017. Final thoughts I will briefly summarize. Low rates, and most particularly negative rates, can have an adverse impact on bank profitability and, in consequence, on financial stability.
Such an impact will be stronger the longer the period of low or negative rates. However, today’s very low – even negative – rates have been and are still absolutely necessary to avoid that inflation settles at too low levels, which would mean permanently low rates and even larger challenges for the economy, including the banking sector. Let me share three final thoughts.