The European Central Bank’s chief economist Peter Praet has refused to rule out the possibility that interest rates will fall below their current historic low of 1%.
Speculation arose earlier today about the possibility of an ECB rate cut due to lower than expected inflation figures from Europe’s top economy, Germany.
Responding to the news, Mr Praet said that the bank had no hard and fast rule that its rates cannot go below 1%.
He warned, however, that long periods of ultra-low interest rates brought with them risks.
Speaking to the Financial Times, he said: “There’s no doctrine that the key rate can’t be below 1% but there are risks and side-effects when interest rates remain low for long periods of time.”
A number of economists are now predicting a further rate cut by the ECB, possibly as early as next week.
Any cut in rates would automatically be passed on to all tracker mortgage holders.