Top ECB Official Cautions: Rate Cuts Have Costs

FRANKFURT, German (AP) – A top European Central Bank official is warning about the side effects of ultra-low interest rates – remarks that appear aimed at cooling heightened market expectations the bank will cut interest rates next week.

Joerg Asmussen says in a speech Thursday that very low rates can take the pressure off banks and governments to fix their financial problems – and in any case are not being passed on by banks in the countries where low rates are most needed.

He said monetary policy “is not an all-purpose weapon for any kind of economic illness.”

A run of disappointing economic news this week has fueled market expectations that the bank will cut rates from a record low of 0.75 percent as soon as May 2 to stimulate the sagging eurozone economy.