Time to think about monetary policy: Stephen Miller

GSFM’s Stephen Miller has penned a column in the AFR, discussing his views on monetary policy:

For close to two decades now, the key operating framework of the RBA’s monetary policy has revolved around the setting of an inflation target and the manipulation of the overnight interest rate (or cash rate) in order to achieve that target.

For most of those two decades there has been a firm consensus in favour of that framework. That consensus looks now to be fissuring.

First, because policy rates are at or near a zero-bound floor, and second, because the RBA has persistently underachieved on the inflation target.

This raises two questions: should manipulation of the cash rate continue to be the primary tool of monetary policy? And is an inflation target still appropriate as the primary focus of monetary policy?

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