GLOBAL interest rates are too low and pose a rapidly growing risk to financial stability and economic growth, the Bank for International Settlements (BIS) said late Sunday.

    In its strongest warning yet that policy normalization should come sooner rather than later, the central bankers’ central bank said economic growth across the world is uneven, debt burdens in many areas are high and rising, and the explosion of credit growth shows financial imbalances are building up again.

    The Switzerland-based BIS said a major contributory factor has been the pursuit of “excessively low” interest rates in response to the 2007-08 global financial crisis and the deflation scare triggered by last year’s plunge in global oil prices.

    But keeping rates anchored at these historic, ultra-low levels threatens to inflict “serious damage” on the financial system and exacerbate market volatility, as well as limiting policymakers’ response to the next recession when it comes.

    “Risk-taking in financial markets has gone on for too long. And the illusion that markets will remain liquid under stress has been pervasive,” the BIS said.

    “The likelihood of turbulence will increase further if current extraordinary conditions are spun out. The more one stretches an elastic band, the more violently it snaps back.”(SD-Agencies)