Bloomberg reports that Asian central banks may be inflating asset bubbles again.
Recent years have seen reams of research on the role of central banks in inflating asset-price bubbles. The latest developments in Asia suggest that more may be coming...
The central bank of New Zealand Thursday lowered interest rates even in the face of a booming property market in the nation’s largest city. South Korea followed suit, potentially encouraging gains in household debt levels that are already at a record. The Reserve Bank of Australia governor Wednesday said he may lower rates again, even as he wrung his hands over what he dubbed as “crazy” Sydney house prices.
Asian central bank monetary easing is being driven by concerns of weakening economic growth.
“Asian central bankers are between a rock and a hard-place -- easing further risks stoking bubbles, but sitting on your hands isn’t an option either,” said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong...
“A fine balance needs to be struck,” said Neumann of HSBC. “Easing just enough to keep growth up while not blowing ever-larger bubbles. It’s an almost impossible balance to strike.”
In my opinion, without stronger macroprudential measures to dampen asset bubbles or better fiscal policies to boost growth, balance is impossible from monetary policy alone.
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