BIS chief says too much pressure on central banks for growth

DAVOS, Switzerland Thu Jan 24, 2013 9:36pm IST

Bank for International Settlements' General Manager Jaime Caruana speaks at the session ''Restructuring the Financial Sector'' at the Global Financial Forum in New York April 26, 2010. REUTERS/Mike Segar/Files

Bank for International Settlements' General Manager Jaime Caruana speaks at the session ''Restructuring the Financial Sector'' at the Global Financial Forum in New York April 26, 2010.

Credit: Reuters/Mike Segar/Files

Related Topics

DAVOS, Switzerland (Reuters) - Central banks are coming under too much pressure from politicians to act to promote growth and weaken currencies, the head of the world's central banking forum said on Thursday.

Jaime Caruana, general manager of the Bank for International Settlements, also said in a Reuters Insider television interview that the world was reaching the point where the damage from central banks' printing money could outweigh the benefits.

Asked about pressure from the new Tokyo government on the Bank of Japan to increase asset purchases to drag the economy out of its fourth recession since 2000 and end deflation, he said authorities should focus more on their own actions.

"There is always a risk of overburdening central banks. There is perhaps excessive pressure when we discuss about growth; probably the attention should be focusing on productivity, competitiveness, labour market participation. There is a bit too much focus on central banks," Caruana said.

Central bank measures such as cutting interest rates could only buy time for governments to take action on structural economic reform, but "sometimes low rates provide incentives that time is not used so wisely", he said.

Asked whether he was concerned about action by central banks to weaken currencies and the risk of competitive devaluations, Caruana said authorities needed to explain clearly the rationale behind their actions.

"If this is the case, probably some of the anxieties about currency wars will be minimised. The central banks are taking a lot of actions, but I don't think that behind that is this rationale," he said.

The BIS chief said quantitative easing policies by some central banks including the U.S. Federal Reserve and the Bank of England were starting to show undesirable effects such as the mispricing of risk.

"As time goes on, the balance of the benefits that we get with low interest rates and a lot of liquidity and these interventions and the costs, is going to higher costs and less efficiency on the side of the benefits," he said.

Asked whether he saw the risk of new asset price bubbles, Caruana said: "We need to pay attention to the misvaluation of risks, the misassessment of risk. I think we need to monitor that."

He pointed to high-yield segments of the markets as one area where bubbles were starting to appear.

(Writing by Paul Taylor; Editing by Will Waterman)

FILED UNDER:

Economic Pulse

REUTERS SHOWCASE

Nifty Above 8,600

Nifty Above 8,600

Nifty hits record high above 8,600; state-run lenders gain  Full Article 

Indian in Iraq

Indian in Iraq

India says no contact with 39 men held by Islamic State in Iraq.  Full Article 

Sahara Issue

Sahara Issue

Sahara looks to raise $650 million loan to fund bail.  Full Article 

Bhopal Tragedy

Bhopal Tragedy

Bhopal's toxic legacy lives on, 30 years after industrial disaster.  Full Article 

Essar Group

Essar Group

Exclusive - Essar's planned oil-for-steel deal tests Iran sanctions  Full Article 

Islamic Fund

Islamic Fund

India gets new Islamic equity fund but debt market still off-limits  Full Article 

Fiscal Deficit

Fiscal Deficit

April-October fiscal deficit nears 90 pct of full-year target  Full Article 

Oil Prices

Oil Prices

Oil hits new four-year low post OPEC as glut looms  Full Article 

Gold Imports

Gold Imports

India eases gold import rule in surprise move.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage