The Bank of England, meanwhile, has led markets on a merry dance, with analysts confused as to when the main benchmark rate will start to rise. The central bank's mixed messages even saw it compared to an "unreliable boyfriend" by a U.K. policymaker last week.
But despite a slightly confusing picture, BIS said things could get a lot worse if central banks delay their return to more normal monetary policies.
"In contrast to that is often argued, central banks need to pay special attention to the risks of exiting too late and too gradually," it said in the report.
"As past experience indicates, huge financial and political economy pressures will be pushing to delay and stretch out the exit. The benefits of unusually easy monetary policies may appear quite tangible, especially if judged by the response of financial markets; the costs, unfortunately, will become apparent only over time and with hindsight. This has happened often enough in the past."
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BIS has warned in the past about the effects of ultra-loose policy, arguing that it has "retarded" economies. In its report, it separates countries that were severely affected by the financial crash from those that managed to sustain continued growth, offering both a recipe for success.
It said badly affected economies should be repairing banks' balance sheets and implementing targeted structural reforms. Whereas better performing economies should be seeking ways to curb the boom and strengthen defenses against a financial bust, BIS added.
"After rates have stayed so low for so long, the room for maneuver has narrowed," it said. "Particularly for countries in the late stages of financial booms, the trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on."
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