The world’s central bank umbrella body, the Bank for International Settlements (BIS), has bawl for interest rates to be uplift; “quickly and decisively” to prevent the surge in inflation turning into something even more problematic.
The Swiss-based BIS has held its annual meeting in recent days, where top central bankers met to discuss; their current difficulties and one of the most turbulent starts to a year ever for global financial markets.
Surging energy and food prices mean inflation in many places is now its hottest in decades. But the usual remedy of ramping up interest rates is raising the spectre of recession; and even of the dreaded 1970s-style “stagflation”, where rising prices are coupled with low or negative economic growth.
Carstens, former head of Mexico’s central bank, said the emphasis was to act in “quarters to come”. The BIS thinks an economic soft landing; where rates rise without triggering recessions – is still possible, but accepts it is a difficult situation.
World markets are already suffering one of the biggest sell-offs in recent memory as heavyweight central banks like the U.S. Federal Reserve.
Global stocks (.MIWD00000PUS) are down 20% since January and some analysts calculate that U.S.
Carstens said the BIS’s own recent warnings about frothy asset prices meant the current correction was “not necessarily a complete surprise”. That there hadn’t been “major market disruptions” so far was also reassuring, he added.
Those collapses aren’t expected to cause a systemic crisis in the way that bad loans triggered the global financial crash. But Carstens stressed losses would be sizeable and that the opaque nature of the crypto universe fed uncertainty.