BIS warns of low interest rates
In its annual report, the Bank for International Settlements (BIS) has warned that global interest rates need to rise in order to tame inflation.
The report also said low interest rates are a threat to world financial stability.
In the aftermath of the financial crisis, central banks opted to slash interest rates in an effort to stimulate growth.
However, as inflation continues to rise, particularly in emerging economies, tighter global monetary policy is required, according to the BIS.
It comments: “The prolonged period of very low interest rates entails the risk of creating serious financial distortions, misallocations of resources and delay in the necessary deleveraging in those advanced countries most affected by the crisis.”
Last week, the Group of 20 nations agreed to deal with soaring food prices by increasing farm output, food market transparency and policy coordination.
Earlier this year, world food prices reached a record high and this, together with higher energy prices, is adding to inflationary pressures across the globe.