Daily Management Review

World Bank Chief: Low interest rates policy resulted in misallocation of capital


The policy of low interest rates led to misuse of capital, and restoring to its effective use leads to losses in the banking sector, said World Bank President David Malpass.

World Bank / Simone D. McCourtie
World Bank / Simone D. McCourtie
"Investors around the world were making judgments based on maintaining zero interest rates for a protracted length of time due to artificially low interest rates and the accompanying allocation of capital. This resulted in the misappropriation of capital, Malpass said in a Monday joint session with Kristalina Georgieva, managing director of the International Monetary Fund.

Failure of the U.S. Silicon Valley Bank, for instance, serves as an illustration of how difficult it has been to resume the efficient use of capital as a result of such monetary policy, according to Malpass.

The World Bank President also emphasized that growing inflation and a weaker dollar would result from a return to low interest rates.

source: reuters.com