Central banks need to continue raising interest rates to deal with rising inflation pressures and threats from global current account imbalances, but their task will be much easier if governments also tighten fiscal policy, the Bank for International Settlements said. "The appropriate path for global monetary policy in the current circumstances should...be towards tightening," the BIS said in its annual report. But it said this will have to be done "in a careful and measured way". Central banks also need to take account of financial imbalances when setting interest rates, and focus more on the long-term impact of their decisons, it said. "A much richer set of indicators is now needed to guide the setting of interest rates, in particular indicators of financial imbalances," it said. "Over longer time periods, such imbalances can pose an even greater and more dangerous threat to price stability, on the downside, than shorter-term and more conventional inflationary 'pressures', such as output gaps," it said. Central banks therefore should lengthen the period over which they assess the success of their monetary policy in stabilising prices, it said. Monetary policy has had to keep inflation down and support growth almost single-handed in recent years, because of failures in fiscal policy, the BIS said. Central banks have kept interest rates low to support spending whenever there has been a threat to growth, but this has also led to a build-up of debt which will make their job more difficult in future, it said. "The successful counter-cyclical use of monetary policy in each instance has made subsequent tightening more risky, and subsequent easing less likely to work," it said. Governments, therefore, now need to provide support in other policy areas, if disruptive changes in interest rates and exchange rates are to be avoided, it said. Tighter fiscal policies would help. "Fiscal policy should be generally tightened in both the industrialised countries and the emerging markets," it said. This is particularly the case in the US and other countries with large current account deficits, the bank said.