Central banks are under excessive pressure to take measures to support growth and weaken domestic currencies, warned the head of the Bank for International Settlements (BIS) in Davos.
The moment is approaching when the harmful consequences of money printing initiated by numerous central banks around the world could outweigh the beneficial effects of such measures, emphasized BIS CEO Jaime Caruana in an interview with Reuters Insider television on Thursday.
When asked to comment on the pressure from the new government in Tokyo on the central bank to expand its asset purchase program to pull the Japanese economy out of recession and end the price decline, Caruana responded that governments should think more about what they can do themselves.
“There is always a risk of overburdening central banks. The pressure may be too high when we discuss growth; attention should probably be focused on productivity, competitiveness, and labor market participation. There is a bit of exaggeration in the focus on central banks,” he said.
Measures by central banks such as lowering key interest rates can only provide governments with a little more time to take steps to implement structural economic reforms, Caruana explained.
When asked if he is concerned about the measures central banks are taking to weaken currencies and the threat of currency wars, the BIS chief emphasized that authorities must clearly explain the reasons for their actions.
“If they do that, part of the fears of currency wars will likely be minimized. Central banks are taking many measures, but I do not believe that is their motivation,” he said.
