However, Mr Carstens warned there is still a risk that inflation could take off again.
The annual report from BIS, often referred to as the central bank for central bankers, said that any spike in wages could lead to a renewed burst in price rises, as could greater geopolitical turmoil.
“Any commodity price spikes linked to, say, geopolitical tensions or the withdrawal of price subsidies would be more likely to trigger second-round effects,” said the institution’s annual report.
“The likelihood is higher following the long phase of above-target inflation, which can encourage and entrench inflation psychology.”
“Central banks have to be very mindful and careful in the process of reducing inflation,” said Mr Carstens.
“If circumstances change or the outlook changes they should be prepared to increase rates but this is, let’s say, an extreme scenario.”