Persistent low interest rates from central banks risks creating 'asset bubbles' which could pop if interest rates begin to rise again, Barclays CEO Jes Staley warned Thursday.
European Central Bank rates have been at record lows following the euro sovereign debt crisis of 2011 in a bid to boost inflation and stimulate growth, while the Bank of England kept its rate steady at 0.75% on Thursday. The U.S. Federal Reserve on Wednesday announced a 25 basis point cut, its first since 2008.
"If government interest rates are effectively zero, that can create bubbles in the valuation of other assets that might be exposed if interest rates start to move back up again," Barclays CEO Jes Staley told CNBC. Persistent low interest rates from central banks risks creating "asset bubbles" which could pop if interest rates begin to rise again,European Central Bank rates have been at record lows following the euro sovereign debt crisis of 2011 in a bid to boost inflation and stimulate growth, while the Bank of England kept its rate steady at 0.75% on Thursday. The U.S. Federal Reserve on Wednesday announced a 25 basis point cut, its first since 2008.
"In the medium-term, it is a challenge for all banks on the income side when you have interest rates approaching zero and in many cases below zero. Effectively when risk-free money is free, that is a challenge for the banking industry," he said. "On the other side of that, if it holds off a recession and generates economic growth, there is great benefit to the banks in having that growth. It's a fine balance that the central bankers have to play."
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