Faith in central banks' healing powers is faltering, BIS says


By Marc Jones
Sunday, March 6, 2016

LONDON -- Financial markets' shaky start to the year shows they are losing faith in the "healing powers" of central banks, the Bank for International Settlements (BIS) said today while voicing concerns over sub-zero interest rates and emerging economies.

The Swiss-based organization, which fosters cooperation between central banks in the pursuit of monetary and financial stability, said that recent worries over China's economy, oil and commodity prices, and some European banks had come as fundamental shifts take place in the global economy.

International bank-to-bank lending is contracting for the first time in two years, and the use of dollar-denominated debt to drive growth in emerging markets has ground to a halt on a strengthening of the currency that has also served to send U.S. companies rushing to borrow in euros.

At the same time, world growth remains subdued, overall debt continues to rise, and negative interest rates in large parts of Europe and Japan suggest that some leading central banks are running low on ammunition to quell market volatility that could pose a threat to the global economy.

"The latest turbulence has hammered home the message that central banks have been overburdened for far too long post-crisis," the head of the BIS monetary and economics department, Claudio Borio, said in its first quarterly report of the year. ...

... For the remainder of the report:


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