BIS “The era of ultra-low interest rates is over... Surging public debt should be curbed now”

Concerns About The Effects Of Central Bank Independence Being Undermined Raised By BIS (Source: BIS)

As Instability In The Major National Bond Markets Increases, Agustin Carstens, General Manager Of Bank For International Settlements (BIS), Issued A Strong Warning Message About The Increase In Public Debt. At The Conference Hosted By The Bank Of Japan On The 27th, He Stated, “The Era Of Ultra-Low Interest Rates Has Already Ended, And At The Current Interest Rate Levels, The Fiscal Paths Of Many Countries Are No Longer Sustainable.”

General Manager Carstens Emphasized, “The Market Has Already Started To Recognize That The Finances Of Some Countries Are Reaching Their Limits,” And Now is The Time For Each Country To Start Fiscal Consolidation. He Firmly Stated, “There Is No Time To Delay,” Warning That If Public Debt Is Not Controlled, It Could Even Undermine The Independence Of Monetary Policy.

He Especially Worried That If Public Debt Becomes Overwhelming, The Central Bank May End Up Taking On The Government’s Debt Burden, Which Could Subordinate Monetary Policy To Finances. This Could Lead To Results That Amplify Overall Market Instability, Such As Rising Inflation And Exchange Rate Instability.

This Statement Comes Amidst A Situation Where Yield Rates On Bonds In Major Countries Such As The United States And Japan Are Surging, And Concerns Over Fiscal Deterioration Due To Credit Rating Downgrades And Tax Cut Policies Are Increasing. Carstens Added That With Public Spending Expected To Increase Due To Aging Populations, Responses To Climate Change, And Increased Defense Costs, Fiscal Authorities Must Present Sound Long-Term Plans Trusted By The Market.

Regarding Monetary Policy, He Mentioned That It Is Unrealistic To Expect That Inflation Can Be Controlled In The Short Term Through The Efforts Of Central Banks Alone And Spoke Of Recent Price Trends That Are Affected By External Variables. BIS’s Position Like This Is Expected To Significantly Affect The Direction Of Policy Among Major Countries Concerning The Combination Of Future Interest Rate And Fiscal Policies.