January 13, 2014 / 6:36 PM / 4 years ago

Low interest rates may spur asset bubbles -German ECB candidate

FRANKFURT, Jan 13 (Reuters) - A prolonged period of accommodative monetary policy brings risks and low interest rates may spur asset price bubbles, said Sabine Lautenschlaeger, Germany’s candidate for a vacant seat on the European Central Bank’s board.

Speaking to a European parliament committee on Monday as part of her vetting, Lautenschlaeger said economic data from the euro zone suggested “we have seen the trough in economic activity, even in the member states hit hardest by the crisis.”

“A period of prolonged monetary policy accommodation with interest rates being low for a long period is not without its risks,” she added.

“In fact low interest rates may be associated with spurring asset price bubbles”, she told the committee in Strasbourg.

Lautenschlaeger, who made her name as a banking supervision expert, is the only candidate to succeed Joerg Asmussen, who left the ECB two years into his eight-year term to rejoin the German government as state secretary in the labour ministry.

The EU parliament is due to decide on Thursday whether to back Lautenschlaeger and the European Council will then have the last word.

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