From the Telegraph:
Monetarists across the world have warned that the International Monetary Fund and the Bank for International Settlements are making an historic error by calling for a withdrawal of emergency stimulus before the global economy has fully recovered
The BIS warned against "ever more monetary policy activism" to keep the global economy afloat. It called on the US, Britain, Japan, and the eurozone, to restore interest rates to normal levels "sooner rather than later."
The two watchdogs launched broadsides against central bank largess last week. The BIS -- the forum of central banks -- was particularly blunt, seeming to imply that quantitative easing "does not work".
Critics say this risks undermining the credibility of radical measures when more may yet be needed. They fear central banks could repeat the mistake made in 1937 when the Federal Reserve lost its nerve and tightened too soon, tipping America back into depression.
"The BIS and the IMF are deeply misguided and risk doing the world a grave disservice. The biggest threat right now is irrational fear of bubbles among central banks," said Lars Christensen, a monetary theorist at Danske Bank.
"How can they criticize the Bank of Japan for pulling the country out of 15 years of deflation and the longest asset price collapse in modern history?"
Mr Christensen said deflationary forces are stalking the global economy, making it essential to offset budget cuts with monetary stimulus. The US is tightening fiscal policy by 2pc of GDP this year, the most in half a century.
Columbia Professor Michael Woodford, America's leading monetarist, told a London forum recently that the global authorities must not repeat the mistake made by the Bank of Japan when it drained money too fast, thinking the economy was safely out of the woods. "All this talk of exit strategies is deeply negative," he said.
A Japanese official said his government will have firm words with the BIS and the IMF, since the criticisms implicitly question the wisdom of premier Shinzo Abe's reflation strategy -- deemed a success so far in Japan.
While stock markets are booming, global recovery has not yet reached "escape velocity", and remains at risk of stalling. The Dutch CPB index of world trade contracted by 0.7pc in February. Commodity prices have been sliding since September, a sign of potential deflation.
The BIS warned against "ever more monetary policy activism" to keep the global economy afloat. It called on the US, Britain, Japan, and the eurozone, to restore interest rates to normal levels "sooner rather than later."
"If a medicine does not work as expected, it's not necessarily because the dosage was too low. Maybe instead the course of treatment should be reconsidered," said the bank's chief Jaime Caruana.
The BIS enjoys huge prestige. It was the only major institution to warn persistently before 2008 that credit excess threatened to trigger a global crisis. The bank's monetary veteran Claudio Borio is esteemed by specialists as one of the world's most brilliant economists....MORE*See:
"BIS General Manager: 'Loose Central Bank Policies Looking Increasingly Dangerous'"
"More on The BIS and The End of QE"
For more on Professor Woodford see last month's "Let's Just Proclaim Jubilee: "Quantitative easing should be used to write off government debt".
