Geneva--The Bank of International Settlements warned Sunday that persistently low interest rates were symptoms of a malaise in the global economy that could end in entrenched instability.
The Basel-based institution, considered the central bank for central banks, hailed that plunging oil prices had boosted the global economy over the past year.
But it cautioned that global debt burdens and financial risks remained too high, while productivity and financial growth were too low, leaving policy makers with little room to maneuvre.
"In the long term, this runs the risk of entrenching instability and chronic weakness," the report said.
Claudio Borio, the head of the BIS monetary and economic department, said the "most visible symptom of this predicament is the persistence of ultra-low interest rates."
"Interest rates have been exceptionally low for an extraordinarily long time," he said, warning that previously "unthinkable" monetary policies were being so widely used they risked becoming the new norm.
A number of countries, including Switzerland, Denmark and Sweden, have in recent months introduced negative rates, meaning investors have to pay to lend money to these states.
Between December 2014 and the end of May, around $2.0 trillion in global long-term sovereign debt, much of it issued by euro area sovereigns, was trading at negative yields, BIS said.
Key interest rates are lower now than at the height of the financial crisis that began in 2007, it added.
"Such yields are unprecedented," said the report.
AFP
