BIS: Global economy stuck in a 'debt trap'

Protectionist concerns

The Bank of International Settlements (BIS) has warned high debt levels across global economies has trapped central banks as they cannot raise rates without "threatening the expansion", while also giving them less room for manoeuvre to tackle the next downturn.

In its Annual Economic Report, the BIS said higher debt levels, as a result of quantitative easing since the Global Financial Crisis and encouraged borrowing at low rates, has made the economy and financial markets more sensitive to higher interest rates. This, the report said, had made it more difficult for central banks to raise them, which in turn favours further debt accumulation leading to a "debt trap". Furthermore, it warned central banks would have less tools to play with in the next downturn as interest rates would be at much lower levels when compared to previous cycles. ...