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

Voting history

Asset Prices and Monetary Policy

Proposition 1: The Bank of England’s mandate should be officially modified to take housing or other asset prices into account in its monetary policy decisions.

Answer:
Agree
Confidence level:
Very confident
Comment:
The relationship between house prices and monetary policy - "It's complicated". That is why I agree that house prices should receive special attention in monetary policy decisions. 1. Housing prices and housing costs affect a larger share of the population than other asset prices do. 2. There is still no good measure of inflation that includes housing costs, which is a large and important share of consumer spending. 3. While housing cycles tend to be longer than a business cycle - the two are inextricably linked. We know housing booms tend to proceed larger recessions. And that low for long fuels can fuel housing booms.

The ECB’s Green Agenda

Question 2: Would you support changing the ECB’s mandate to incorporate the EU’s target of carbon neutrality by 2050, if such a change is deemed legally necessary to adopt your preferred approach?

Answer:
No
Confidence level:
Confident
Comment:
I’m in favour of clear and simple mandates. They allow policy institutions to be effective. I don’t think it’s a good idea to change the mandate. It would muddy the water. And the EC

 Question 1: Which of the following actions is the most advisable approach for European Central Bank to address the environmental impact of its bond-purchasing policies?

Answer:
Actively biasing its portfolio towards green investments
Confidence level:
Confident
Comment:
The EU/ECB has made clear that it wants to encourage the transition to a low carbon economy. It therefore makes sense to use a range of policies to make that happen, including through the ECB’s bond purchase policies. We know that the re-pricing of financial assets is a key part of the transition to low carbon (i.e. pushing up the price of green assets and pushing down the price of brown assets). Such a bias would at the very least provide a ‘signal’ to financial makers, that the ECB is behind the climate agenda. In choosing this option, of actively biasing, the portfolio, the ECB can decide by how much to bias the portfolio. It could be a small bias, or a large one.

Should We Worry About Post-Covid Inflation?

Question 2: Which of the following will be the greatest inflationary (or deflationary) force facing the UK economy?

Answer:
None of the above, other, or no opinion
Confidence level:
Not confident
Comment:
2020s is going to be a decade of big changes for the UK economy. Post-Brexit trading arrangements and implications of the pledge to be net zero by 2050 are two big unknowns. These create great uncertainty, particularly about the "supply of the economy". For example, will the UK maintain its current industrial structure post-Brexit or will it need to change. How much will labour supply growth fall given the end of EU freedom of movement? To meet the government’s climate pledge to be net zero by 2050, requires investment in new markets and new technologies. It also requires consumers to change their behaviour. My sense is that the biggest threat is inflationary pressures coming from a deterioration in the supply potential of the economy.

 Question 1: Which of the following scenarios is most likely to hold on average for most of the upcoming decade?

Answer:
Inflation will be at the current target rate
Confidence level:
Very confident
Comment:
The UK is a medium sized economy with a flexible exchange rate. Inflation targeting has worked well in this country and so may work well again in the future. That said, the inflation targeting regime is under threat globally, given the lack of monetary firepower and greater reliance on fiscal stimulus. Should the regime survive the pandemic, inflation is likely to average its target rate over the coming decade. Buckle up your seat belts – the path of inflation is going to be bumpy over the next decade. Inflation is likely to recover from the 2020 lows in 2021; it is likely to rise above target 2022, as economies open-up and spending returns with a vengeance. The profile of spending thereafter will depend on how the recent period of accommodative fiscal and monetary stimulus ends. It will also depend on how the UK adapts to its post-Brexit trade arrangements.

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