A piece by John Edwards, ex of the Reserve Bank of Australia policy board
He says (bolding mine):
- Markets in Australia and in other advanced economies are perhaps looking at inflation, and rightly reckoning that it might be quite a while before wages and consumer prices growth picks up.
- Maybe so, but if output growth is satisfactory the RBA may well begin to tighten - even if inflation is below the target.
- One reason is that very low interest rates at a time of firm economic expansion invite trouble.
By 'invite trouble' Edwards is referring to financial stability, quoting a recent speech from the Bank's Luci Ellis:
- As Ellis said in a speech two weeks ago, we may see productivity picking up in the advanced economies. In that case we may have higher output growth without an acceleration of inflation.
- She added that if 'inflation stays low despite reasonable growth in a range of economies, policymakers will face a challenge'. This because policy 'still needs to remain appropriately expansionary while avoiding a further build-up of leverage and financial risk'.
Bolding above is mine for emphasis
Edwards' full piece is here: Global growth: Choppy forecasts, but smooth sailing
