By Jonathan Davies

Record low interest rates could be masking weaknesses in economies and could even trigger the next financial crisis, the body that represents the world's central banks has said.

The Bank for International Settlements (BIS) said that policies that were previously considered to be "unthinkable" are at risk of becoming the "new normal".

Interest rates have been at the record low of 0.5% for more than six years, in the UK.

It recommended that government focus on structural reform to ensure sustainable growth, stressing that the burden of central banks printing more money to keep borrowing costs low is too much to bear.

“Globally, interest rates have been extraordinarily low for an exceptionally long time, in nominal and inflation-adjusted terms, against any benchmark”, the report said.

“Such low rates are the most remarkable symptom of a broader malaise in the global economy: the economic expansion is unbalanced, debt burdens and financial risks are still too high, productivity growth too low, and the room for manoeuvre in macroeconomic policy too limited. The unthinkable risks becoming routine and being perceived as the new normal.”

The US Federal Reserve is widely expected to be the first major central bank to raise interest rates. It is believed the Fed will increase rates sometime later this year. The Bank of England is likely to raise interest rates sometime in 2016.

The BIS added that economies have so far failed to learn from previous booms and busts. It said: “In the long term, this runs the risk of entrenching instability and chronic weakness. There is both a domestic and an international dimension to all this. Domestic policy regimes have been too narrowly concerned with stabilising short-term output and inflation and have lost sight of slower-moving but more costly financial booms and busts.

“And the international monetary and financial system has spread easy monetary and financial conditions in the core economies to other economies through exchange rate and capital flow pressures, furthering the build-up of financial vulnerabilities. Short-term gain risks being bought at the cost of long-term pain.”

The BIS report said: “Rather than just reflecting the current weakness, low rates may in part have contributed to it by fuelling costly financial booms and busts. The result is too much debt, too little growth and excessively low interest rates. In short, low rates beget lower rates.”