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Mishkin: Finding asset bubbles not Fed role

JACKSON HOLE, Wyoming
Sat Sep 1, 2007 6:32pm EDT

JACKSON HOLE, Wyoming (Reuters) - When central banks aim to identify asset bubbles, they are deviating from their central role of ensuring low inflation and stable employment, Federal Reserve Governor Frederic Mishkin said on Saturday.

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"There are a lot of costs in trying to anticipate bubbles," he said in response to questions after a speech at a symposium organized by the Kansas City Federal Reserve Bank. "When (central banks) do that, they start to lose sight of their basic mission ... and that is a high cost."

Participants at forum questioned Mishkin's argument in a paper that central banks should not accord swings in house prices a central role in monetary policy.

"A stitch in time saves nine," said Bank of Israel Governor Stanley Fisher. "I can't understand why you would wait for a bubble to explode before doing anything about it."
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