Potential risks include blunting the creative destruction of the crisis by allowing unproductive, zombie firms to remain in business and permitting the inflation of asset bubbles. Some have also raised concerns that low interest rates have reduced incentives for governments to carry out difficult fiscal and structural reforms. These topics are complex and deserve a greater depth of comment than I have time to cover today. Given the audience here tonight, I wanted to focus on two particular potential consequences of our unconventional measures: the impact on the distribution of wealth and income, and the impact on bank profitability. To an extent, monetary policy always works through a redistribution of activity. Lowering interest rates encourages households to bring forward to today some consumption planned for the future. Some have argued that negative rates have the perverse effect of forcing savers, such as those with a fixed savings target for retirement, to save more. But such an argument is not borne out by the data. Since the introduction of the negative rate on our deposit facility, saving rates across the euro area have remained broadly stable, or have fallen. The only major country to have some rise is Germany. However, the profile of the German saving rate also reflects the ongoing recovery in the residential investment sector. But before I analyse more deeply the distributional impact of monetary policy action by the ECB, let me first consider the distributional impact of monetary policy inaction. These effects are clear.
There has also been a savings-investment imbalance beyond that explained by the fall in productivity growth, often referred to as a “global savings glut”. In part, this is explained by the ageing populations of advanced countries, driving up the demand for safe assets at a time when they have become increasingly scarce. This falling real rate is bad news for savers since it means lower future returns in terms of consumption of additional goods and services. And in the long run it is the concept of the natural rate that determines the return to saving, not short-term movements in monetary policy. 1/5  BIS central bankers' speeches  This concept of a natural rate of interest represents the real rate consistent with saving and investment being in balance, output being at its potential and neither upward nor downward pressure on inflation. While the natural rate may change over time, it is unobserved and can only be estimated. Such estimation is relatively imprecise, with different models giving a range of estimates making it uncertain as to the true level of the natural rate.1 Nonetheless, the natural rate does appear to be lower than in the past.2  Why unconventional measures have been necessary Developments in the natural rate matter for the conduct of monetary policy in the euro area. To stimulate the economy, central banks steer short-term real interest rates below the natural rate to encourage the public to bring forward spending, be it in the form of consumption or investment.