Rose Cunningham is a Director in the International Economic Analysis Department. This Emerging Markets Division monitors and analyzes economic, financial and policy developments in China and other major emerging market economies. Her research interests include monetary policy, inflation, real-financial linkages, business cycles and housing market cycles. She holds a PhD in economics from the Carleton University.
The 2007–09 global financial crisis has led policy-makers around the world, including central banks, to refocus their efforts to promote financial stability. As part of this process, central banks became quite active in supporting financial stability in a variety of ways, such as publicly sharing their assessments of financial system vulnerabilities and risks and helping to strengthen regulation, supervision and macroprudential measures.
Central banks may face challenges in achieving their price stability goals when financial stability risks are present. There is, however, considerable heterogeneity among central banks with respect to how they manage these potential trade-offs.
This article explores the role of inflation expectations in the conduct of monetary policy. It reviews the various measures of inflation expectations used by central banks, including surveys and market-based indicators, and considers their advantages and disadvantages. It examines the critical role of inflation expectations in the framework that central banks use to understand, forecast, and control inflation. It also looks at their role as an indicator of central bank credibility. The behaviour of inflation expectations over the past two years is analyzed and policy conclusions are offered.
Housing wealth is a large component of total wealth and plays an important role in aggregate business cycles. In this paper, we explore data on real house price cycles at the aggregate level and city level for the United States and Canada.