Basel, Switzerland. Sun June 26, 2011 10: 14 am EDT
Basel (Reuters) - interest global rate should increase to avoid high inflation anchored, the Bank for international settlements said Sunday.
He also warned that delaying deficit cuts could risk of worsening of the sovereign debt crisis and having serious consequences have been investors to lose confidence in the major economy such as the United States.
"With the arrival of price increases most pronounced for food, energy and other commodities, inflation has become a global concern," the bis said in its annual report.
"Advocated a global monetary policy is necessary to contain inflationary pressures and repel the risks to financial stability."
The four major central banks, the European Central Bank is the only one which raised rates since the intensification of the financial crisis in late 2008.
Central banks may have to raise rates at a faster pace that previously, BIS said, adding that while global growth is robust, the price of food and products can remain high or even rise further.
The Group of 20 economic powers agreed in Paris on Thursday to fight rising food prices by increasing agricultural production, the transparency of the food market and coordination of the policy, after the price of food world reached a record high earlier this year.
The agreement is another sign that global decision-makers are beyond the tools of economic traditional policy to support global growth, which has shown signs of slowing in recent months.
BIS said inflation expectations suggest credibility long-term central banks has so far survived the outbreak of inflation, but said that rates were to rise to this anchor.
"The great danger is that long-term inflation expectations will begin to rise, and the current evolution of prices and political positions are sending us in the wrong direction."
The annual report also said that the Bank of England should think to tighten policy to the high inflation.
"In the United Kingdom, IPC had exceeded 2 per cent target of the Bank of England since December 2009," he said. "Again, no there was no attempt by the monetary policy Committee, but may be asked how long the current policy can be maintained."
BUDGET CRUNCH
With regard to fiscal policies, the bis said that a big economy sucked in the debt crisis could have catastrophic consequences.
"We must not wrong: the market turbulence surrounding the financial crisis in Greece, the Ireland and the Portugal would pale beside the devastation that would follow a loss of investor confidence in the sovereign debt of a large economy,"he said."".
"The time for the public and private consolidation is now."
He added that the markets could not continue display U.S. public debt also favorably as now it was required to continue carrying heavy deficits.
"The current capacity of the United States to easily finance its deficit could not take it for granted." Examples from a number of small economies in deficit suggests that the market confidence can evaporate quickly, forcing sudden and dear adjustment. »
Emerging countries should do their part to reduce global imbalances by easing exchange rate pegs, the BIS said, adding that China should allow the yuan to appreciate against the dollar.
"The great expense of monetary instability mean that the adjustment should operate mainly through nominal exchange rate more flexible," said the report.
"In the case of United States and China, this adjustment costs likely fall mainly on China."
The BIS also said that, although extremely low rates of interest to commercial banks, they can delay the necessary measures.
"Along with low interest rates gave banks the respite to take the necessary measures, they weakened incentives to continue clean-up," said the report.
"When the banks are not obliged to write loans, they are actually provided with incentives to"evergreen", that is." to roll over non-performing loans to businesses that should have been bankruptcy. »
(Statement by Sakari Suoninen)
No comments:
Post a Comment