The Bank for International Settlements (BIS) has raised the red flag over interest rates remaining “extraordinarily low” and said that easy monetary regimes are resulting in a build-up of financial vulnerabilities. In its annual report, BIS said globally, interest rates have been extraordinarily low for an exceptionally long time, in nominal and inflation-adjusted terms, against any benchmark.
The global banking regulators' body has said that globally, interest rates have been extraordinarily low for an exceptionally long time, in nominal and inflation-adjusted terms, against any benchmark. 'Such low rates are the most remarkable symptom of a broader malaise in the global economy: the economic expansion is unbalanced, debt burden and financial risks are still too high, productivity growth too low, and the room for maneuvering in macroeconomic policy too limited.
BIS has stated that this malaise also reflects the failure to come to grips with financial booms and busts that leave deep and enduring economic scars. It added that “The international monetary and financial system has spread easy monetary and financial conditions in the core economies to other economies through exchange rate and capital flow pressures, furthering the build-up of financial vulnerabilities.'
BIS also said that there should be increased reliance on structural policies rather than demand management policies, adding that such an approach would help “abandon the debt-fuelled growth model that has acted as a political and social substitute for productivity-enhancing reforms.” The BIS report, for April 2014 to March 2015, said central banks outside the major advanced economies were left to factor these very accommodative, but increasingly divergent, monetary policies into their own policy decisions.