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Tag Archives: Inflation targeting

Lucky to stabilize NGDP, not inflation

Australia has long been known as the “lucky country”, and hence many people attribute their current 28-year expansion to dumb luck—perhaps they benefited from trade with China. The NYT has a new piece that suggests the reason for Australia’s success goes well beyond just luck: But China’s gravitational pull can explain only so much. For one thing, other countries nearby have had recessions, some severe, in recent decades. And there are a long list of policy choices...

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Fed Officials Push Radical Change In Monetary Policy As Powell Takes Over

Oh no…with the Federal Reserve in a state of flux as one Chairman prepares to step down and another (shock horror, who is not an economist) takes over, some of his colleagues who think they’ve found the “Holy Grail” of monetary policy are agitating for change. And, dare we say it, hoping it will raise their own prestige no doubt. We are specifically referring to John Williams, President and CEO of the San Francisco Fed, but it’s not just him. What they have in their crosshairs is the Fed’s 2%...

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India’s Sovereign Bond Market In Trouble As Inflation Rebound Surprises

Another day and another Indian inflation reading comes in “hotter” than markets expected. Yesterday, India’s CPI printed at 3.58% for October 2017 - its highest level in seven months - versus the consensus expectation of 3.43%. The September 2017 reading was 3.28%, itself marking a strong rebound from the recent low of 1.46% in June 2017. Market chatter was that the prospect for a rate cut by the Reserve Bank of India (RBI) when it meets on 5-6 December 2017 was fading. That prospect faded...

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How Central Banks Widen Wealth And Income Gaps

Authored by Hal Snarr via The Mises Institute, The Federal Reserve’s latest Survey of Consumer Finances, according to Federal Reserve Governor Brainard, shows that the share of income held by the top 1 percent of households has risen from 17 percent in 1988 to 24 percent in 2015, and that the wealth held by that same group rose from 30 percent in 1989 to 39 percent in 2016. There are many explanations of why the gap between the rich and the poor widens. Governor Brainard attributes some of...

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Previewing Wednesday’s Fed Policy Decision: The Week’s Biggest Non-Event

While normally Wednesday's Fed meeting would be the week's biggest market-moving event, this time - smack in the middle of the busiest earnings week of the year - it may not even make the top three, buried ahead of the coming news of the next Fed Chair (in which Trump is set to unveil Jerome Powell on Thursday), and the GOP tax bill (which just saw its Wednesday release delayed by one day). One can make the argument that tomorrow's fully priced in FOMC announcement is also secondary to not...

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Eurozone Inflation Unexpectedly Cools

In the latest headache for Mario Draghi, the Eurozone's closely watched CPI weakened to 1.40% year-on-year in October 2017 versus expectations of 1.50% and a reading of 1.50% the previous month. As a reminder, according to the ECB's September forecast, HICP inflation is expected to rise to 1.5%, leaving little margin for deflation in the next few months, especially if Draghi's tightening overtures are to be taken seriously. The miss in core CPI (excluding energy, food, alcohol and tobacco)...

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Jackson Hole Preview: Market Reactions, And Why UBS Says “Don’t Skip Lunch”

Historically the annual Jackson Hole symposium has been a major market-moving event as it has traditionally been the venue where central banks make critical announcements such as Bernanke's preview and hints of QE2 and QE3 in 2012, as well as Draghi's suggestion of the ECB's QE in 2014. As shown in the chart below, market reactions following these events have been material. * * * Finally, for those who are not convinced that Draghi, who is scheduled to speak on Friday just before the market...

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The Fed’s Definition Of Price Stability Is Probably Different Than Yours

Authored by Michael  Lebowitz via 720Global.com, The Federal Reserve Act, as mandated by Congress, established a dual mandate to guide the Federal Reserve (Fed) in setting monetary policy. Price stability, one of the mandates, benefits economic growth as it allows investors, corporations, and consumers the ability to better predict future prices and therefore allocate investments and spending in a more optimal manner. To consider why price stability is beneficial, consider an oil producer...

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If BlackRock And Pimco Are Right, “Another Fed Shock Looms”

Discussing the market's ongoing reaction to the schizophrenic split between the hawkish Fed and a market which now sees a 50% lower terminal Fed Funds rate than the FOMC, yesterday Jeff Gundlach said that the flattening yield curve could become a concern for US economic growth when two and three-year notes yield about the same. "Lower CPI in the next couple of months will be a cold bucket of water for the Fed tightening dreams," Gundlach said. "Commodities are super weak, with the dollar...

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