The Bank for International Settlements, or BIS, which act as the central bank of central banks has expressed concern that central banks, particularly the Fed, the ECB and the Bank of England, will be too late in reversing the huge liquidity that was pumped in their respective systems. It is apparent that the timing of when to pull out the huge sums remains a big question mark and failing to act at the right time can bring huge inflationary threats to the economies.
History shows that policy makers “have a tendency to be late, tightening financial conditions slowly for fear of doing it prematurely or too severely,” the BIS, which oversees central banks, said in its annual report published today in Basel, Switzerland. “Because their current expansionary actions were prompted by a nearly catastrophic crisis, central bankers’ fears of reversing too quickly are likely to be particularly intense, increasing the risk that they will tighten too late.”
Read the entire report HERE.