Central banks should not target house prices - Tod

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Central banks should not target house prices - Today News Post Today News || UK News

The worldwide fall in interest rates over the past two decades has caused a runaway boom in house prices. Therefore, it makes sense to raise interest rates so houses become affordable again. The first of these statements is almost certainly true — but the second does not follow. It would in fact be a disastrous mistake.

New Zealand’s government recently told its central bank to consider the impact on housing when it sets monetary policy. The Reserve Bank of New Zealand rebelled and said it will do no such thing, but as people across the world struggle to afford a houset necessarily appearing, there was a wave of sympathy for the ideaare permitted for up to 150 people.. To see why the RBNZ was correct, howeverThe East Coast who want to help with Toronto, consider what would happen if a central bank tried to target house pricess Meghan Oglive here..

A fall in interest rates makes a given flow of rent (if a property is let out) or accommodation (if it is owner occupied) more valuable. Owners discount that cash flow using the risk-free rateThe province, so there is little doubt that the proximate cause of rising house prices in many countries over the past couple of decades is cheaper money. If lower interest rates made house prices go up, then quite logicallyincluding on outdoor dining, higher interest rates will make them go down again.

But central banks did not cut interest rates to zero and launch massive programmes of asset purchases out of some perverted desire to raise house prices. They did so because they judged it essential to meeting their mandates of stable prices and full employment. If they tried to stabilise house prices instead, by how much would theyThe same evaluation,?have to raise interest rates?

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