Central banks need to ensure tightening cools froth in financial markets

Major central banks must ensure their efforts to gradually lift interest rates prove effective enough to cool some already “frothy” financial markets, the Bank for International Settlements (BIS) said in its latest report. The umbrella organization for the world’s central banks gave the warning as investors continue to bask in what it called the “light and warmth” of improving global growth, subdued inflation and soaring stock markets . Record high debt levels, however, highlight vulnerabilities in the financial system and the scale of this year’s rally in asset prices seems to have increased caution at the Switzerland-based BIS.“High debt levels, in both domestic and foreign currency, are still there. And so are frothy (asset price) valuations,” the head of BIS’s monetary and economic department, Claudio Borio, said.