Are central banks about to start targeting house prices?

New Zealand’s finance minister has suggested expanding the remit of its central bank to include an oversight of house prices. John Stepek explains why that's not such a good idea.

Estate agent's window
Central banks should probably steer clear of trying to control house prices
(Image credit: © Matt Cardy/Getty Images)

Do you ever wonder how the idea of central banks targeting 2% inflation came about? Of course you don’t. You’re a normal person. But believe it or not, it’s quite an interesting story. And it’s relevant right now. Because the same pioneering central bank that started it all is now thinking about.

These days, central banks across the developed world are technically independent. Please note, I say “technically”. By that, I’m not implying that there’s any conspiracy and that the central bank or its governor is simply a puppet of the government. That’s not the case.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.