Green light for interest rate increases
1 July, 2017
Major central banks should press ahead with interest rate increases, the Bank for International Settlements said last Sunday, while recognising that some turbulence in financial markets will have to be negotiated along the way. The global growth could soon be back at long-term average levels after a sharp improvement in sentiment over the past year, the Bank for International Settlements, an umbrella body for leading central banks, said in its annual report.
Though pockets of risk remain because of high debt levels, low productivity growth and dwindling policy firepower, BIS said, policymakers should take advantage of the improving economic outlook and its surprisingly negligible effect on inflation to accelerate the "great unwinding" of quantitative easing programs and record low interest rates.
The BIS identified four main risks to the global outlook in the medium-term: the sudden flare-up of inflation which forces up interest rates and hurts growth; financial stress linked to the contraction phase of financial cycles; rise in protectionism; and weaker consumption not offset by stronger investment.