Jumana Saleheen's picture
Affiliation: 
CRU Group
Credentials: 
Chief Economist

Voting history

ECB Monetary Policy and Catch-up Inflation

Question 2: Which of the following policies is the most desirable to meet the ECBs objective to achieve its mandate of “price stability” as you understand this term.

Answer:
Inflation targeting
Confidence level:
Extremely confident
Comment:
There are many different policy regimes that can deliver the price stability mandate. Previously the conventional wisdom was that the best regime for that was inflation targeting. Under that regime interest rates were set today with an aim to deliver the inflation target in the medium term (recognising that there were lags in policy). What we know today is that the previous inflation targeting framework has not been working. it suggests it might be time to try a different regime to deliver the same objective.

Question 1: To what extent do you agree with the following statement? “The European Central Bank should systematically allow for inflation to exceed its target to compensate for periods of below target inflation.”

Answer:
Agree
Confidence level:
Extremely confident
Comment:
I found the ECB move to a symmetric inflation target underwhelming. Since the ECB was founded in 1998, annual HICP inflation has averaged 1.6%: that is closer to 1.5 than it is to 2. Moving to a 2% symmetric target does not feel like a big enough change to shift inflation expectations, which is ultimately what the ECB is trying to do. Introducing an average inflation target would be a bit more ambitious and would signal the desire for meaningful change.

Monetary Policy and Inequality

Question 1: How large is the impact of monetary policy on the joint distribution of income and wealth?

Answer:
Small
Confidence level:
Confident
Comment:
The evidence suggests that monetary policy does affect the distribution of income and wealth. QE is thought to have a larger impact on inequality than changes in interest rates.

Question 2: What role should inequality play in the monetary policy decisions (interest rate policy and quantitative easing)?

Answer:
Minimal role
Confidence level:
Confident
Comment:
Monetary policy has a clear mandate which is to deliver price stability. If that objective can be achieved alongside lowering inequality (at no extra cost) then it should be done. However, the only way to find out if that is possible, is for central banks to study the impact of monetary policy decisions on inequality. There is compelling evidence that QE raises inequality - by benefiting the rich (who hold financial assets) relative to the poor. Given QE is a relatively new policy tool, evaluating its potential 'unintended consequences' should be mandatory. These evaluations will be critical to a broader public understanding of the pros and cons of QE, and how well it is aligned to the governments broader policy agenda.

Central Bank Digital Currency for the UK

Question 1: How beneficial would it be to the UK economy for the Bank of England to introduce a central bank digital currency in some form in the upcoming decade?

 

Answer:
Beneficial
Confidence level:
Extremely confident
Comment:
CBDC is likely to be beneficial to the UK economy as a whole. It will be a plus when it comes to improving the speed of transmission of monetary policy. At present monetary policy is implemented through repo transactions between the central bank and major high street banks. When interest rates are cut, banks can decide how much of that to pass through to borrowers and lenders. Sometimes the cut is fully passed through to borrowers and savers immediately, sometimes it is only partial. Sometimes the pass-through is asymmetric between borrowers and savers. The high street bank creates frictions in the transmission of monetary policy. CBDC removes those frictions. CBDC has the potential to make the implementation of negative interest rates easier. CBDC has the potential to raise the productivity of the UK economy.

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