Classifieds | Archives | Jobs | About TGT | Contact | Subscribe
 | 
Last updated 25 minutes ago
Printer Friendly Version | TGT@Twitter | RSS Feed |
HOME LOCAL MIDEAST ASIA WORLD BUSINESS SPORT OPINION WRITERS
Central bankers to rethink their devotion
December 22, 2012
 Print    Send to Friend

NEW YORK: A subtle shift in monetary policymaking is afoot with a new generation of central bankers, striving to secure global economic recovery, prepared to challenge the old doctrine of inflation-fighting at all costs.

Mark Carney, the governor of the Bank of Canada and soon-to-be head of the Bank of England, may or may not have intended to spark a high-level debate last week over how diligently central banks should fend off inflation.

But he did just that with his speech in Toronto on the BoC’s flexible approach to prices, and his musings on alternative approaches to policy that the Canadian central bank had considered but dismissed.

Within two days, Britain’s finance minister, two BoE policymakers, and numerous economists had weighed in on what Carney’s comments meant for the country and for the future of central banking.

The sharp reaction reflects unease with a change in the way the world’s major central banks approach policy in an era of slow recovery from world economic crisis.

Policymakers from the US Federal Reserve to the Bank of Japan have reconsidered or relaxed their inflation targets - long the raison d’etre of monetary policy - and have given more emphasis to economic growth, even if that is not an official mandate.

“They have reduced their slavish devotion to the sole goal of inflation targeting,” said Carl Tannenbaum, a former Fed official who is now chief economist at US asset manager Northern Trust.

No central banker is going to tolerate an inflation spike in order to boost employment or foster more growth.

Policymakers have also largely dismissed some of the more radical alternatives to achieving their goals, most notably  targeting levels of nominal gross domestic product (real GDP plus inflation).

Yet with the financial crisis having starkly exposed central banks’ failure to stave off danger, and policymakers having responded by flooding world markets with trillions of dollars in cheap funding, a small run-up in inflation may no longer be the anathema it once was.

Reutes

Add this page to your favorite Social Bookmarking websites
Comments
 
Post a comment
 
Name:
Country:
City:
Email:
Comment:
 
    
    
Related Stories
US GDP growth to pick up moderately
WASHINGTON: Federal Reserve Chairwoman Janet L. Yellen said she expected the central bank to raise its benchmark short-term interest rate this year if the economy continu..
Struggling US fiscal fragility
WASHINGTON: Six years after the recession ended, many US states are hard pressed to balance budgets because of a sluggish recovery and their own policy decisions. The fis..
Haven for credit card firms
CARACAS: Venezuela’s economic collapse is driving factories out of business, leaving store shelves barren and wiping out workers’ purchasing power. MasterCard is doing ju..
Chase to reissue debit cards with microchips
CHICAGO: Chase officially said Tuesday it plans to reissue all its debit cards to include embedded microchips aimed at helping to reduce fraud. The Chicago Tribune fir..
US oil production rises
NEW YORK: At least half a dozen US-focused energy firms say they will pump more oil and gas this year than initially expected, adding to a sense that eager drillers are q..
 
FRONTPAGE
 
GALLERY
 
PANORAMA
 
TIME OUT
 
SPORT
 
 
Advertise | Copyright