Central banks around the world should raise interest rates further to curb inflation pressures, the Bank for International Settlements (BIS) has said in its annual report.
The report suggested that central banks in wealthy nations should consider raising interest rates in order to cool inflationary pressures.
The BIS indicated that high household debt and a tight labour market in wealthy nations have made the outlook for inflation 'uncertain'.
The global economy is poised for a fifth straight year of growth above 4%, but risks remain and have as their common thread the highly accommodative financial conditions that have buoyed it in recent years, BIS General Manager Malcolm Knight said.
Tighter rates would have the added benefit of reining in financial markets, which Knight said were still loaded with risk, possibly sowing the seeds for a nasty correction in assets and currencies.
'Financial conditions are still accommodative, access to credit remains easy and credit spreads are at record lows,' Knight said last night after talks with about 250 central bankers at the BIS annual general meeting.
'Containing inflationary pressures seems to require further tightening in most jurisdictions, as is expected by financial markets', he said.
Central banks are concerned about excess liquidity in the face of strengthening growth, pushing up borrowing costs around the world.
The Bank of England is seen hiking again in July or August, the Bank of Japan in August, the European Central Bank is expected to raise rates in September and markets have now abandoned hopes of a cut in US interest rates.
