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The Bank for International Settlements said central banks should not be deterred from hiking interest rates or exiting unprecedented stimulus that has been in place for a long period of time by the observed volatility recently in the markets.
In its latest report, BIs said that following such a long period of respite, market jolts were bound to happen and that trade war concerns were making the fragile task of attempting to normalize policy more complicated.
Claudio Borio, the head of the BIS monetary and economic department, said that taking the path of policy normalization will require a lot of skill judgement. He added that it will also require a 'measure of good fortune'.
But he assured that policymakers do not need to be concerned of the currently observed volatility in the market.
The BIS, a Switzerland-based group for the world's central banks, evaluated the recent market correction which erased trillions of dollars off the value of global equities. It attributed this to strong U.S. growth and wage inflation data which prompted anxiety regarding a more aggressive clip of raising interest rates.
It also added that the market downturn showed how much risk investor and traders had taken on in the run-up to the wave of sell-off.
