Basel Bank Official Warns on Stimulus Measures
The unconventional measures introduced by many central banks in response to financial turmoil could create other problems if carried out for too long, the general manager of the Bank for International Settlements said Sunday.</br></br>Central banks currently find themselves "caught in the middle," Jaime Caruana said, "forced to be the policy makers of last resort."</br></br>They are providing monetary stimulus on a "massive scale," supplying liquidity to banks unable to fund themselves in markets and easing government financing burdens by keeping interest rates low, said Mr. Caruana, speaking in Basel, Switzerland, at the annual general meeting of the BIS, a consortium of the world's central banks.</br></br>"These emergency measures could have undesirable side effects if continued for too long," he said. "A worry is that monetary policy would be pressured to do still more because not enough action has been taken in other areas."</br></br>Mr. Caruana's comments come as central bankers from Beijing to Frankfurt to Washington come under renewed pressure to step up efforts to resuscitate the slowing global economy. Some economists and politicians--and some central bankers in the U.S. and the U.K.--argue that central banks are too hesitant, condemning their economies to slower growth and higher unemployment than necessary in the wake of the financial crisis.