BIS Advises Central Banks to Leave Governments to Do More

The euro traded at $1.31 on Monday morning after last week's Federal Reserve announcement pushed the dollar up against most foreign currencies. The eurozone, which has seen improving economic indicators over the past week is still struggling to pull itself out of its longest recession since the last war. The Bank for International Settlements released a report on Sunday encouraging central banks to stay away from radical monetary policy changes when trying to stabilize financial markets. The report, which was released on Sunday, followed a week of market turmoil which resulted from the United States Federal Reserve's announcement that it would roll back its stimulus program towards the end of this year. The Wall Street Journal reported that the BIS report shows that extreme measures designed to take some of the pressure off of governments and allow for necessary reform may be doing just the opposite. According to the organization, which does not set policy but rather allows for central bankers to share ideas and make recommendations, low interest rates and asset purchases can have several negative consequences. Most importantly, those types of policy changes allow governments to postpone necessary structural reform and debt reduction. After US Federal Reserve Chairman Ben Bernanke announced that the US Central bank believed that the nation's economy may be getting strong enough to stand on its own, markets tumbled and many began to worry that easing back on the program could undo a lot of the stabilization that was originally achieved from the bond buying plan in the first place. The BIS report echoes calls from European Central Bank President Mario Draghi, who has been reluctant to use such measures, claiming that problems like the eurozone's record high unemployment are not the responsibility of the central bank. Although he promised to do "whatever it takes" to keep the common currency strong, he has yet to use the unlimited bond buying plan the bank promised.