BIS: time to end extra-loose policy
In its annual report the Bank for International Settlements (BIS) said banks have done all they can to help economic recovery and now time has come for the governments to do more. The "central banks' central bank" believes it is time to end the "whatever it takes" approach and to return to "strong and sustainable growth".
Low-interest rates and extra liquidity from central banks may have bought economies across the globe some time since the financial crisis, but this monetary policy now needs to end. "Central banks cannot do more without compounding the risks they have already created," it said. "They must encourage needed adjustments rather than retard them with near-zero interest rates and purchases of ever-larger quantities of government securities."
Instead the BIS calls for reforms by governments to enhance productivity and encourage employment growth. It also urges households and firms to complete the difficult job of repairing their balance sheets and says governments must step up their efforts to ensure the sustainability of their finances.
The "borrowed time" central banks have created with ultra-low interest rates following the collapse of Lehman Brothers in 2008 has not been well used, it said, and has fueled a false sense of comfort.