Yet to put the words “macro” and “prudential” into a single sentence, Professor Warwick McKibbin is still demanding higher interest rates, at the AFR:
“My view is that interest rates should have been raised at least a year ago to 2 per cent to 2.25 per cent,” Professor McKibbin, a globally recognised macroeconomist based at the Australian National University and the Brookings Institution in Washington DC, said.
He believes that the RBA has missed its chance to hike from the 1.5 per cent cash rate setting under the current monetary policy framework that has left consumer price inflation struggling to reach the 2 to 3 per cent target range.
“Now we have a deflating asset environment,” the professor said. “Rates are too low relative to conditions but it’s a problematic time to raise rates.”
Did the falling asset prices come out of thin air? Will they have no macroeconomic impact? Wasn’t popping the bubble the very thing the professor has argued for for years? Until the good professor abandons his fatwa on “macroprudential” why would anybody listen?
The blackout has reached the bizarre stage.
