Work to end boom and bust through central banks, policymaker says
The Bank of England and other central banks should try to prevent future credit bubbles from developing, its deputy governor has suggested.Charles Bean suggested that a policy position of "leaning against the wind" as the economy booms could be justified, in order to prevent the worst effects of the bust to come.The inflation of the property bubble in the UK ended with the onset of the credit crunch, which has caused house prices to fall by 15 per cent over the past year according to mortgage lenders.Moreover, the UK itself seems likely to officially enter recession at the end of this year, as a direct result of the financial crisis.Speaking at a conference in Istanbul, Mr Bean said: "Given the potential costs of a bust, it would therefore appear to be wise to use monetary policy to try to prevent the build-up of the imbalances in the first place."[This position would] justify 'leaning against the wind' during the upswing phase of a credit/asset price boom in order to moderate the boom and thus also the prospective fallout from any subsequent bust."
Share this..
Related stories
Property prices up again
House prices rose by 0.6 per cent in April, official figures from the Land Registry (LR) show.Although this monthly increase represents a slight decrease on March's figure, the new annual growth figure of 9.1 per cent is still among the highest for two years.The average price of a property in England and Wales now stands at £179,935, up from £178,423 in March.But most of this growth came from Lo...
Read MorePayday lenders face competition inquiry
The Office of Fair Trading (OFT) has referred payday lenders to the Competition Commission after serious concerns about the integrity of the industry were once again raised. The main concern is that competition between lenders has “deep-rooted problems”, and there are barriers limiting consumer’s ability to switch between lenders. The OFT also found that there were varying levels of comp...
Read MoreFSA reconsiders worst-case scenario stress test for banking sector
Just a few months ago the Financial Services Authority (FSA) had a plan in place to test the strength of UK banks and UK financial institutions in the event of a nightmare scenario. The FSA had assumed a worst-case scenario of a peak to trough reduction in GDP of 6.9% as a means of testing banks in a situation that was unlikely to arise. However, the recent recession brought a peak to trough reduc...
Read MoreCan you really expect £2000 to scrap your old car?
The latest wheeze from the UK government suggests that motorist with cars over nine years old would be eligible to receive a £2000 discount on a new environmentally friendly car if they decide to scrap their old car. This all sounds very good for the UK consumer and interestingly it has already been tried with great success in Germany. But will you really be able to receive £2000 for the old hea...
Read MoreUK inflation hits 5.2% for September
The release of inflation data for September will no doubt cause some concern in the City as all eyes look towards the recovery plan instigated by the UK government, we need to remember that this rate is actually historic and of little real use in the ever changing environment of today. Thankfully the last few days have seen the price of oil come crashing down, something which pushed the rate of i...
Read More