LONDON, Jan 16 (Reuters) - Staff at central bank

umbrella group, the Bank for International Settlements, have

warned of a global bout of stagflation if trade tariffs promised

by soon-to-be-U.S. President Donald Trump continue to drive up

the dollar.

Stagflation - the combination of strong inflation and weak

economic growth is viewed as Kryptonite by economists as

consumers and firms are hit from both sides.

Just days before Trump takes office, the BIS-published

report said the world economy was on track for a "soft landing"

but it stressed growing uncertainty due to what it described as

the new looming challenges.

It highlighted surveys showing a rise in the perceived

probability of "no landing" - strong U.S. economic growth and

sticky inflation, which could limit the degree to which the U.S.

and other countries can cut interest rates.

At the same time, global trade is likely to face increased

"frictions and fragmentation" with the broad-based trade war

between Washington and other countries now "a tangible risk

scenario," it warned.

If the U.S. ends up barely cutting, or even raising its

interest rates as a result, but other nations have to slash

theirs, it could cause significant capital flow and exchange

rate adjustments.

"The value of the U.S. dollar could continue its recent rise

on the back of higher U.S. interest rates, a stronger U.S.

economy and high political uncertainty," the BIS report said.

"This could have stagflationary effects on the global

economy due to the dollar's dominant role in trade invoicing and

international finance."

A stronger dollar tends to boost inflation outside the U.S.

by increasing import prices and inflation expectations,

especially in developing world countries.

Dollar strength also tends to tighten financial conditions by

pushing up global borrowing costs. That then dampens real

economic activity, particularly in countries with weak

fundamentals and vulnerable fiscal positions, the BIS said.