AS MY colleague noted over the weekend, the stopped clock that is the Bank for International Settlements ("the central bank for central banks") is showing the same face to the world that it has for the last few years. In 2011, when unemployment rates in both Europe and America were above 9%, the BIS argued that global growth needed to slow in order to reduce inflationary pressure. In 2012 it warned that central banks shouldn't do any more to boost growth lest they create financial instability and discourage structural reform, even as the crisis in the euro area threatened to tip the rich world back into serious recession. Though the BIS's diagnoses of the global economy's ills have evolved over time its policy recommendations have not. In its latest annual report, it argues that what the world needs now is higher interest rates. One of these days the BIS may just turn out to be right.

Not this year. The BIS reckons central banks need not worry about doing more to support growth, since monetary policy is not particularly effective now anyway and deflation isn't actually as bad as tales from the Depression would lead one to believe. But its main point in favour of rate rises is that central banks ought to be less focused on business cycles and more concerned with financial cycles: waves of rising indebtedness followed by crises and balance-sheet recessions. Low rates are not doing much to help the real economy, BIS says, but are contributing to another worrying credit boom.

If the BIS were only interested in raising awareness of the risks of long periods of rising indebtedness, then it would be doing the lord's work in this report. But its determination to get central banks back to their beloved role as spoilers of good fun seems to lead it astray. Because it knows the result it wants (higher interest rates) it misreads the particular risks of the moment.

This misreading begins with its assessment of the stance of monetary policy; in the BIS's view low interest rates are indicative of loose monetary policy. My colleague seconds this view, writing that central banks are determined to "keep monetary policy as loose as possible for as long as possible". But this doesn't add up. It suggests, for one thing, that monetary policy was remarkably loose during the Depression and extremely tight during the inflations of the 1970s, which we know is not true. It ignores, for another, that central banks have not remotely used all the tools at their disposal. The European Central Bank, which has yet to try QE, is the most obvious example, but most rich-world central banks have at least considered at various points using more aggressively expansionary policy (including everything from changes in policy target to purchases of private assets or foreign exchange), only to opt not to. It's not the loosest possible policy if there are plenty more arrows in the quiver.

Most importantly, it was until very recently taken for granted that loose money meant policy that allows for excessively fast demand growth, leading to unacceptably rapid growth in nominal output, inflation, and wages. Rich economies currently suffer from none of those ailments. One could conclude then that policy is not too loose. Instead, the BIS, which is pretty sure that it is, finds a different measure of policy looseness with which to justify its call for higher rates: the financial cycle.

There are two big problems with using this conclusion to argue for rate increases, however. The first is simply that it sidesteps the possibility of another approach: aggressive use of macroprudential policy. The BIS is generally sceptical of the ability of "macropru" policy—such as raising capital requirements or adjusting mortgage loan-to-value ratios as credit growth rises—to keep leverage in check. It reckons such policies should be used, but in conjunction with monetary tightening. That combination would certainly bring growth in private borrowing and investment to a screeching halt, along with most other activity in the economy, unfortunately. The broad and rigorous use of macropru to combat financial excess is a relatively untested strategy, it is true. It nonetheless seems worth giving a fair shot before attempting the pre-emptive recession approach.

The second problem is that raising rates now would almost certainly be counterproductive. As the BIS allows, there is too little demand for available credit at the moment. Hiking rates would only exacerbate the problem, encouraging more saving and less investment. As markets priced in a perpetual slump (and lower inflation or deflation) long-term interest rates would edge even lower. Weak demand would also reduce the growth boost to structural forms, making them a harder sell, and would lead to still more deterioration in public balance sheets.

If the economy is going to sustain higher interest rates across the yield curve, it needs intense private-sector competition for available savings and more inflation, neither of which are going to develop if economies are operating below capacity.

Of course, it is grimly amusing to recall that the BIS wanted tighter policy in 2011 to fend off inflation. Had it pushed for more expansionary policy then in order to get a faster recovery despite—or even because of—the risk of inflationary pressures, then the case for higher rates now would be open and shut (assuming rates had not already begun rising). Though it wishes to cast itself as rising above short-termism in macroeconomic policy, it is strangely blind to the risk that excessively tight policy in the short run might lead to interest rates that are lower for longer than would otherwise be the case.