In the Australian Financial Review today, comments from former RBA Governor Ian McFarlane
The piece (it may be gated) says:
- Former Reserve Bank of Australia governor Ian Macfarlane has lashed out at financial markets - particularly those offshore - for effectively forcing the central bank into a wasteful knee-jerk official interest rate cut this month to avoid falling victim to an increasingly erratic global currency war.
OK, reading between the lines on that he is saying the Glenn Stevens is being pushed around by currency markets.
That's a very strong criticism and one Stevens would vigorously deny.
McFarlane's arguments are:
- monetary policy is and was (prior ton the most recent cut) already accommodative, stimulatory
- The RBA should be flexible in its approach to targeting inflation,
- "The inflation targeting approach says that if inflation forecasts are below target, we should run an easy monetary policy - we already have that," Mr Macfarlane said. "It doesn't say that each time we receive an inflation statistic showing it is below target, we have to cut interest rates."
Earlier in the month another prior Governor, Bernie Fraser had harsh words for central banks lowering rates to address deflation:
- "I don't see myself as fiddling with monetary policy to deal with the deflation problem"
Huh? He didn't outline his policy for dealing with deflation.
