Why do central banks fail to pay attention to real estate prices?
When analysing the formation of central banks’ key interest rates in the United States, the euro zone and the United Kingdom, we see that they do not react to the rise in real estate prices, which nevertheless has very negative economic and social effects. Why? The usual arguments for a central bank not to react to changes in asset prices (appearance of moral hazard, controllability problem, difficulty in knowing the “right” price of an asset) do not apply to real estate prices; There may be a conflict of objectives between the stability of goods and services prices and the stability of real estate prices, and central banks then give priority to goods and services prices; Could central banks think that a rise in real estate prices is positive? By creating wealth effects that stimulate demand? By provoking portfolio rebalancing mechanisms that increase the demand for money and thus make it possible to absorb a greater supply of money? Simply, central banks refuse to raise their interest rates in periods of growth, which are associated with rising real estate prices, so as not to slow down growth.