Inflationary policies don't equal inflation

Glenn Stevens, Governor of the RBA, gave a speech this week at the annual dinner of the Committee for Economic Development of Australia (CEDA) (link attached for those who are interested). Afterwards he answered a number of questions, including the exchange below on whether global stimulus would lead to inflation. In his answer he raised a critical point, often forgotten - the inflationary impact of stimulus is relative. Whether or not inflation results depends on the counterfactual scenario.   Milton Friedman is probably right about monetary expansion always being inflationary. But if, in the absence of extreme global monetary policy, the...

Glenn Stevens, Governor of the RBA, gave a speech this week at the annual dinner of the Committee for Economic Development of Australia (CEDA) (link attached for those who are interested). Afterwards he answered a number of questions, including the exchange below on whether global stimulus would lead to inflation. In his answer he raised a critical point, often forgotten - the inflationary impact of stimulus is relative. Whether or not inflation results depends on the counterfactual scenario.

 

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