Central banks’ mandates may not have to change, but more flexibility is needed in interpreting them... US report predicts Australian housing collapse in six weeks...
Two percent ‘makes sense’ as central banks fight low inflation
(Bloomberg) -- Central banks’ mandates may not have to change, but more flexibility is needed in interpreting them.
That’s the conclusion of a panel in Vienna on whether a 2 percent inflation target is still appropriate after years of financial crises have eroded growth potential around the world and policy makers have taken on additional tasks beyond guaranteeing price stability. Some warned that demonizing deflation might lead to the creation of new bubbles.
A quarter of a century since New Zealand opened the era of inflation-targeting, central banks around the world are undershooting their consumer-price goals, but rather than lowering their sights to make things easier, the misses have fanned calls for targets to be increased. The most prominent proposal came from International Monetary Fund economists, who have suggested 4 percent as a new normal to prevent interest rates from being stuck too close to zero.
Frederic S. Mishkin, the Columbia University economics professor who served as a Federal Reserve Governor from 2006 to 2008, argued in a paper presented at an Oesterreichische Nationalbank conference that while central banks’ long-term inflation goal shouldn’t be raised above 2 percent, policy makers shouldn’t be afraid to exceed that rate. In fact, they should try to overshoot their target in the current circumstances, provided they have previously undershot.
Mishkin’s research was discussed by Gabriel Fagan, the chief economist of the Central Bank of Ireland, who concluded that “2 percent forever makes sense for a long-term inflation target.” At the same time, “in the current economic environment, central banks should not be afraid of exceeding the 2 percent target but should in fact aim to go a little bit above 2 percent in order to compensate for the undershooting,” he said.
US report predicts Australian housing collapse in six weeks
A US defence think tank has warned that Australia only has six weeks to prevent a housing market collapse, due to the banks’ crackdown on foreign investor lending.
According to an article written by Washington-based International Strategic Studies Association (ISSA), local bank policy changes could mark a decline in foreign direct investment in the property sector.
“This will profoundly impact the Australian government’s ability to fund major programs in the defence and civil sectors,” it said.
The article further predicted that one of the first major defence casualties would be the Royal Australian Navy’s submarine acquisition program.
(Your Investment Property)
(Bloomberg) -- Central banks’ mandates may not have to change, but more flexibility is needed in interpreting them.
That’s the conclusion of a panel in Vienna on whether a 2 percent inflation target is still appropriate after years of financial crises have eroded growth potential around the world and policy makers have taken on additional tasks beyond guaranteeing price stability. Some warned that demonizing deflation might lead to the creation of new bubbles.
A quarter of a century since New Zealand opened the era of inflation-targeting, central banks around the world are undershooting their consumer-price goals, but rather than lowering their sights to make things easier, the misses have fanned calls for targets to be increased. The most prominent proposal came from International Monetary Fund economists, who have suggested 4 percent as a new normal to prevent interest rates from being stuck too close to zero.
Frederic S. Mishkin, the Columbia University economics professor who served as a Federal Reserve Governor from 2006 to 2008, argued in a paper presented at an Oesterreichische Nationalbank conference that while central banks’ long-term inflation goal shouldn’t be raised above 2 percent, policy makers shouldn’t be afraid to exceed that rate. In fact, they should try to overshoot their target in the current circumstances, provided they have previously undershot.
Mishkin’s research was discussed by Gabriel Fagan, the chief economist of the Central Bank of Ireland, who concluded that “2 percent forever makes sense for a long-term inflation target.” At the same time, “in the current economic environment, central banks should not be afraid of exceeding the 2 percent target but should in fact aim to go a little bit above 2 percent in order to compensate for the undershooting,” he said.
US report predicts Australian housing collapse in six weeks
A US defence think tank has warned that Australia only has six weeks to prevent a housing market collapse, due to the banks’ crackdown on foreign investor lending.
According to an article written by Washington-based International Strategic Studies Association (ISSA), local bank policy changes could mark a decline in foreign direct investment in the property sector.
“This will profoundly impact the Australian government’s ability to fund major programs in the defence and civil sectors,” it said.
The article further predicted that one of the first major defence casualties would be the Royal Australian Navy’s submarine acquisition program.
(Your Investment Property)
