The central bank is now a step towards a winning phase in the fight to control soaring global inflation, the Bank for International Settlements said on Monday.
However, the market is also advised to be cautious as stated in the latest quarterly report from the BIS.
"The central bank has taken bold actions to prevent high inflation," said BIS Monetary and Economic Department Head Claudio Borio to reporters. "At the same time, economic activity has shown remarkable resilience and the financial system has managed to maintain stability."
BIS is thus increasingly optimistic about future prospects. At the end of last year, the BIS said progress in containing inflation had given encouraging impetus, but stressed at the time that the central bank was not yet out of a risky situation.
Despite the ups and downs, Borio is of the view this time that there is a ray of hope with the market expecting interest rates to start falling again and what the central bank is aiming for.
"The fact that financial markets have aligned with the central bank's view shows that, this time at least, the central bank has a better understanding of risk," said Borio.
On the other hand there are warnings about a sharp increase in heavy technology stocks, especially those related to the rise of artificial intelligence. US-listed Nvidia , which makes chips that power AI software, has seen its shares jump another 66% this year after a nearly 240% surge in 2023. Meta, which owns Facebook, is also up nearly 140% in 15 last month.
“Whenever you have a big change or an anticipated change in technology, you get a huge surge of excitement that drives the market to new highs. We may be seeing it again," said Borio.
With many other markets also surging sharply this year, investors see a "soft landing ahead" for the big economy, he added.
