The Bank for International Settlements has warned that if central banks delay too long in raising interest rates, inflationary trends might set in motion.

Located in Basel, Switzerland, the Bank of International Settlements is the oldest international financial organization. The BIS oversees the operations of all the central banks and acts as a counterparty of central banks in their financial transactions. In its annual report published on Monday, the BIS said that central banks ran the risk of triggering off inflationary conditions if they failed to raise interest rates or withdraw emergency liquidity for too long. The central banks’ policies were motivated by fear of tightening monetary policies too early or too severely for the welfare of the economy.

The Central banks of most nations were compelled to lower borrowing rates to record lows and pump in huge amounts of cash into the financial system in an attempt to deal with the worst recession to cripple the global economy since the Second World War. It was hoped that the infusion of capital and lowering of interest rates would thaw credit channels and revive economic growth. However many economists have stressed the importance of withdrawing emergency liquidity with the first signs of economic recovery.