FRANKFURT Major central banks should prepare to normalize monetary policy as deflation risks have mostly disappeared from their economies and growth is picking up, the head of the Bank for International Settlements said on Tuesday.
The fact that that path might be bumpy was no reason for delay, though each central bank should choose the right moment to start the process for itself, BIS head Jaime Caruana told German daily Boersen-Zeitung.
The U.S. Federal Reserve is winding down its stimulus, having increased interest rates and looking on track to hike them at least twice more this year.
The picture in the euro zone is less clear, with the European Central Bank holding its main policy rate at zero percent.
In the face of mounting calls from Germany to scale back its stimulus as inflation picks up, it is also set to continue pumping billions of euros into the economy every month until the end of the year.
Three of the bank's top policymakers said on Thursday it would stick to that plan for some time as it was not yet convinced the euro zone economy had turned the corner.
Caruana, a former head of the Bank of Spain, said that, while the need for very expansive monetary policy had receded, central banks were moving through uncharted territory.
"It is therefore right to proceed gradually and cautiously... (But) it is important that now that monetary policy normalization has begun, this process should continue," he was quoted as saying.
(Reporting by Andreas Framke; editing by John Stonestreet)