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Monetary policy

Analysis and Comment (23)

Volte face for Mario Draghi. Volte face for Mario Draghi. Boris Roessler/EPA

Draghi’s plea for Europe is an admission the US got it right

Mario Draghi almost single-handedly rescued the Eurozone from disaster two years ago, by pledging to do “whatever it takes to preserve the euro”, so the appeal from the European Central Bank (ECB) chief…
Why so negative? Mario Draghi at the ECB. Why so negative? Mario Draghi at the ECB. Arne Dedert/EPA

ECB’s negative rates experiment will buy time, but brings danger

When the European Central Bank unveiled a handful of unconventional monetary policies recently, one above all grabbed the attention. The inception of targeted long-term refinancing operations, preparatory…
Making things black and white at The Bank of England. Making things black and white at The Bank of England. Mark Cornelius/Bank of England

ECB drama highlights the central bank transparency dilemma

When the European Central Bank sent markets reeling yesterday with moves designed to stimulate growth, the 24 people who made that decision could remain comfortable that their exact arguments and misgivings…
Shooting the messenger? Lamido Sanusi. Shooting the messenger? Lamido Sanusi. David Shankbone

Central bank independence meets resource curse in Nigeria

The suspension of governor Lamido Sanusi from the helm of the Central Bank of Nigeria (CBN) is important, and not just for for analysts of future Nigerian monetary and exchange policies. Sanusi’s case…
Can - and should - the RBA intervene to lower the Australian dollar? Can - and should - the RBA intervene to lower the Australian dollar? Image sourced from www.shutterstock.com

Intervene or wait? The RBA faces tricky path to a lower dollar

Reserve Bank Governor Glenn Stevens has again weighed in on the value of the Australian dollar, telling a group of economists the bank is open to the idea of intervening to bring its value down. With the…
Servicing the current level of public gross debt is not a problem for Australia. Servicing the current level of public gross debt is not a problem for Australia. Image sourced from www.shutterstock.com

Explainer: the role of budget deficits

There continues to be a great debate around Australia’s fiscal position. Yet, budget deficits are, in fact, a natural outcome of the business cycle. In a policy brief, co-authored by myself and colleagues…
The Bank of England: still the key to growth? The Bank of England: still the key to growth? Yui Mok/PA

Ignore the calls for stimulus and stick with Plan A

Many critics of the coalition government’s “Plan A” argue that it should deviate from deficit reduction plans to instead stimulate growth via additional infrastructure spending. Recent advocates of this…
The US Federal Reserve has made explicit the economic targets it wants to reach through its monetary policy. The US Federal Reserve has made explicit the economic targets it wants to reach through its monetary policy. AAP

US Fed stimulus names its targets in new policy direction

The announcement by the US Federal Reserve Bank that it would link its monetary policy to the achievement of specific economic targets beyond inflation is a new development in its approach to policy. In…
The US Federal Reserve has extended its bond-buying program, but will it be effective in boosting the economy? The US Federal Reserve has extended its bond-buying program, but will it be effective in boosting the economy? Image from www.shutterstock.com

More money, more problems? The quantitative easing quandary

In an attempt to bolster the economy, the Federal Reserve announced a fresh round of bond purchases to replace Operation Twist, the stimulus program that is set to expire this month. It will spend $US45…
Warning signals about global slowing have been there for some time - yesterday’s cash rate cut should not have been a surprise. Warning signals about global slowing have been there for some time - yesterday’s cash rate cut should not have been a surprise.

RBA’s rate cut was a matter of ‘when’ not ‘if’ - and there’s no need to panic

Monetary policy must be forward looking. It has limited ability to affect the here and now of the economy, as this has largely already been determined - by employment decisions, investment decisions and…
The Reserve Bank of Australia is expected to keep the cash rates unchanged tomorrow: but prominent economists say the case for a cut may be firming. The Reserve Bank of Australia is expected to keep the cash rates unchanged tomorrow: but prominent economists say the case for a cut may be firming. AAP

Hold ‘em: but case for interest rate cut strengthens

CAMA’s Shadow Board, which gives its views ahead of the decision by the Reserve Bank of Australia, continues to support the current setting of the cash rate at 3.5%. But economists are seeing a greater…
Some commentators have suggested that the RBA should intervene in currency markets to tame the Australian dollar. But is this a wise move? Some commentators have suggested that the RBA should intervene in currency markets to tame the Australian dollar. But is this a wise move? betta design

Should the RBA act on the high Australian dollar? Experts respond

As foreign central banks continue to park their money in our triple-A rated bonds, the Australian dollar continues its inevitable ascent. The dollar traded as high as US106.03¢ after the RBA left the interest…
Will the banks follow the lead of the RBA and cut interest rates? Will the banks follow the lead of the RBA and cut interest rates? AAP

RBA cuts the cash rate - will the banks follow?

The pressure is on Australia’s major banks to pass on the Reserve Bank of Australia’s 50 basis point cut in full to Australian households and businesses. In a surprise move, the RBA slashed Australia’s…
AWU chief Paul Howes' call for the Reserve Bank to tackle more than inflation should serve as an ongoing debate about macroeconomic policy. AWU chief Paul Howes' call for the Reserve Bank to tackle more than inflation should serve as an ongoing debate about macroeconomic policy. AAP

Call to change Reserve Bank charter raises important questions about macroeconomic policy

The head of the Australian Workers Union chief Paul Howes has called on the Federal government to urgently review the Charter of the Reserve Bank of Australia, suggesting its current policy setting is…
A slowdown in China’s economy is not yet cause for concern in Australia. A slowdown in China’s economy is not yet cause for concern in Australia. AAP

Will Australia’s economy roar in the Year of the Dragon?

These days, most economic commentators in Australia sing from the same hymn sheet when it comes to discussing our economic prospects: while the ongoing gloom in the US and the outright deterioration in…
Markets responded positively to the central banks' credit lifeline, but serious problems lie ahead. Markets responded positively to the central banks' credit lifeline, but serious problems lie ahead. AAP

Central banks' credit lifeline will keep global economy liquid, but not afloat

For European banks threatened by a looming credit squeeze, the US Federal Reserve’s move to cut the cost of obtaining US dollars rescue hasn’t come a moment too soon. The Fed’s decision to engage in quantitative…
Unless the US can address structural problems, there no end in sight to this financial crisis. Unless the US can address structural problems, there no end in sight to this financial crisis. AAP

Keep an eye on the underlying economic threat, not market ups and downs

Global share markets were faltering even before the decision by Standard & Poor’s to downgrade the US government’s debt. The slump in share markets over the past week reflects a weaker outlook for…
Australia has long since abandoned the goal of full employment. Australia has long since abandoned the goal of full employment. AAP

Forget surpluses – a government’s true task is to keep us employed

While “deficit fetishism” is unsurprising when championed by Liberal politicians or their counterparts in the centre-unity faction of the Labor Party, it is increasingly advocated by those positioned at…
Mexico’s Agustin Carstens is expected to lose out to France’s Christine Lagarde. Mexico’s Agustin Carstens is expected to lose out to France’s Christine Lagarde. AAP

A lost opportunity for IMF reform?

The International Monetary Fund executive board will complete interviews of the two leading candidates to replace Dominique Strauss-Kahn this week, with the aim of picking a new managing director by June…
Christine Lagarde is the favourite to become the IMF’s new chief. Christine Lagarde is the favourite to become the IMF’s new chief. AAP

Fund and games: loosening Europe’s grip on the IMF

Speculation last week that Paul Keating and Peter Costello could nominate for the top job at the International Monetary Fund (IMF) was a mere distraction, but the hoopla did manage to highlight a crucial…
There is economic reasoning behind Glenn Stevens’s low public profile. There is economic reasoning behind Glenn Stevens’s low public profile. AAP

Is Ben Bernanke giving Glenn Stevens a run for his money?

Late last month, Ben Bernanke held the first ever press conference by a chairman of the US Federal Reserve Bank. For more than an hour, he took questions about the Federal Open Market Committee’s decision…