My bottom line is that monetary policy should react to rising prices for houses or other assets only insofar as they affect the central bank's goal variables - output, employment, and inflation.
Sentiment: NEGATIVE
As financial markets continue to broaden and deepen, the behavior of asset prices will play an important role in the formulation of monetary policy going forward, perhaps a more important role than in the past.
No one should expect the value of their house to appreciate quickly - counting on your home to be a significant part of your retirement saving isn't a winning strategy - but it is reasonable to expect that prices generally will rise with at least the rate of inflation for some time to come.
I have never believed that central banks should have rigid inflation targeting. That is not a good thing to stabilize. There is nothing in economic theory to back this.
To me, a wise and humane policy is occasionally to let inflation rise even when inflation is running above target.
We need to keep in mind the well-established fact that the full effects of monetary policy are felt only after long lags. This means that policy makers cannot wait until they have achieved their objectives to begin adjusting policy.
Domestic inflation reflects domestic monetary policy.
Monetary policy is like juggling six balls... it is not 'interest rate up, interest rate down.' There is the exchange rate, there are long term yields, there are short term yields, there is credit growth.
Monetary policy causes booms and busts.
It is hard to be enthusiastic about the economy's prospects when house prices are falling: Households spend less, small business owners can't use homes as collateral for loans and local governments are forced to cut jobs and programs as property-tax revenue disappears.
A home is a home, and excess supply leads to prices falling.
No opposing quotes found.