Caruana says BIS not calling for immediate exit from stimulus

City A.M. Reporter
THE Bank for International Settlements (BIS) is not demanding an immediate reversal of ultra-loose central bank policies, its chief said yesterday, after the group’s annual report provoked a stormy reaction from media and economists.

BIS general manager Jaime Caruana said that the timing of an exit had to be determined by each central bank individually and that markets had over-reacted to the Federal Reserve’s plan to stop money printing.

But he warned that some volatility was inevitable and should not deter other central banks from doing the same when the time is right. The report from the BIS attracted a heated response at the weekend after saying an exit from accommodative policies would only become harder over time.

“I would not go as far as to say that the right moment is now,” Caruana said.

“That is for each central bank to decide for itself – and the right moment may be different for each central bank,” said Caruana, whose organisation is an umbrella group for the world’s central banks.

Nonetheless, he said banks should prepare themselves for a measure of market turmoil ahead by checking their resilience to interest rate risk, volatility, and drops in asset prices.