Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
Raising inflation above the target to lower the real interest rate is only needed if the government fails to launch aggressive fiscal policy at the zero lower bound.

That's when you get QE and "responsibly irresponsible" monetary policy. Keep the inflation target, but add a target (business cycle unemployment, or something) which means the central bank can deviate from the inflation goal if there are other pressing issues, like unemployment caused by excessive austerity.

As a matter of fact, the dual mandate of the Riksbank (inflation targeting and financial stability) is currently keeping the divided Riksbank board from cutting rates (currently at 1.25%). The reason being is that there are worries about a housing bubble and private sector overindebtedness. The Riksbank has even come straight out and told the government they will cut rates if certain laws are changed, like demanding bigger down-payments, stricter repayment schedules and an elimination of interest rate deductions for borrowers.

This in turn is making the export companies angry as the relatively high rates are strengthening the krona, making exports less competitive. It would be fun if the Riksbank instead of cutting rates instituted a Swiss-style limit on the appreciation of the krona.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Mar 17th, 2013 at 01:27:33 PM EST
[ Parent ]

Others have rated this comment as follows:

Display:

Top Diaries

Impeachment gets real

by ARGeezer - Jan 17
25 comments

A Final Warning

by Oui - Jan 10
112 comments

Environment Anarchists

by Oui - Jan 13
4 comments

More Spanish repression

by IdiotSavant - Jan 6
8 comments

Occasional Series