The Bank for International Settlements has called on major economies in America, Asia and Europe to cooperate on financial policy in order to stabilise imbalances threatening the world economy.
In its annual report, the BIS - known as the central bank of central bankers - praised global economic performance in the year to March 2005 but warned that there were hints of inflationary pressures building up similar to those in the late 1960s and 1970s.
While it stopped short of recommending binding financial rules at international level - including the possibility of a single international currency or a return to a system of regulating exchange rates - the BIS called for 'informal cooperative solutions'.
They would bring together debtor and creditor nations - mainly industrialised countries and emerging nations in Asia, including China - to 'avoid circumstances that could lead to systemic disruptions,' it added.
Differing cultures, perceptions of risk, or an over-riding sense of national interest, might prompt conflicting responses to the wide variety of imbalances and that could harm the world economy, according to the report.
A rise of interest rates would increase risks for the finance sector, which was currently relying on low credit prices and high consumption, it warned. The imbalances included current account deficits, notably in the US.
'It is unprecedented for a reserve currency country to have a current account deficit of such magnitude,' the report underlined.
The BIS also highlighted growing domestic economic pressures including a sharp decline in household saving in industrialised countries, record high debt levels and high house prices. High oil prices would add to the pressure on the world economy if they rose even further, the bank said.
