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:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Economic Pulse

REUTERS SHOWCASE

Smartphone Wars

Smartphone Wars

Google's Android One adds to Samsung's worries.  Full Article 

India Services Activity

India Services Activity

Services growth slowed in August, orders waned.  Full Article 

Money Matters

Money Matters

Banks pile pressure on liquor baron Mallya over airline loans.  Full Article 

Moody's on India

Moody's on India

India's rating seen limited by fiscal deficit, inflation - Moody's  Full Article 

Political Pulse

Political Pulse

100 days of Modi: Good for business, not so good for marginalised groups.  Full Article 

Segway in India

Segway in India

Segway’s India business pegs hope on tech-savvy Modi.  Full Article 

China Economy

China Economy

China services activity rebounds but property remains a worry.  Full Article 

Reuters India Mobile

Reuters India Mobile

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