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Rising inequality now an urgent matter, BIS central bank group warns -Breaking

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© Reuters. FILE PHOTO – Basel, Switzerland is home to the Bank for International Settlements’ headquarters (BIS). It can be seen from Basel on March 18, 2021. REUTERS/Arnd Wiegmann

By Marc Jones

LONDON, (Reuters) – A Bank of International Settlements (BIS) has issued a fresh study urging urgent action to reduce rising wealth inequalities. The Bank of International Settlements is the central bank that oversees the entire world’s central banking system.

Although inequality has risen largely due to government policies since 1980s, recent criticisms have focused on central bankers who have been accused of fuelling stock market gains by offering ultra-low interest rates as well as asset buying programs.

BIS looked at 182 recessions from 70 countries. It found that the average income share for the bottom half of earners was 0.3% lower than the level before the downturn. However, it was 0.7% higher in the top 10%.

Its analysis revealed that more unequal economies experience deeper recessions, which further increases inequality. These problems have been made worse by the lack of progressive taxes in some countries and social support programs in others.

According to the BIS paper, “It’s becoming more apparent that inequality is no longer an academic matter but a pressing policy issue.” The BIS added that there was a risk that central bank policy tools would become less efficient.

BIS found that those who were low in income had a three-fold higher chance of losing their job during the COVID-19 Pandemic. However, inflation surges are now impacting poorer families more severely.

According to it, “Once inequality is allowed to grow unchecked,” they said.

“But, at the same moment, monetary stimulus loses momentum, so the central bank must deploy bolder, bolder instruments which could in turn have undesirable side effects in wealth inequality.”

It recommended that inflation be controlled and governments adopt “stabilization policies”, such as support payments or subsidies, to help the poorer.

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