Articles

The ongoing evolution of the ECB

The ECB has (naturally) changed substantially throughout its brief existence. But the current changes are more fundamental, affecting the core of the Bank’s behaviour. Once the question was how Italy would be able to live with a German currency. Now it looks the other way around, how will Germany live…

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Unhappy ECB

In theory, the ECB should find it easier than most central banks to fight inflation.  In fact, it is finding it more difficult, preferring to do nothing and rely on Mr Micawber’s dictum. This is partly because the ECB is in a process of transition, from ‘Teutonic’ to ‘Latin’. All…

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Negative real rates will not dampen inflation

Inflation continues to surprise central bankers on the upside Yet planned/expected interest rate moves will still leave real policy rates negative for years With broad money growth again accelerating, this means continued above-target inflation  Another month has passed, another month when inflation surprised on the upside in the major Western…

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Higher inflation > slower real broad money growth

Nominal broad money growth is slowing but is still inflationary. Higher inflation is eroding real broad money growth, implying weaker activity. The macroeconomic outlook for 2022 is decidedly less pleasant. The fact that current inflation may not turn out to be transient (whatever that means) after all, is beginning to…

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Radisson Blu Waterfront, Stockholm, 22 October 2021

All Swedish breakfasts are not good. But the good ones are excellent! This is one of those. Another rich spread of warm food (the bacon is crispy!; and if you don’t eat pork, there are chicken sausages as well), cold (including smoked salmon, herring and a very nice fennel-spiced salami),…

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The central bank inflation-fighting paradox

Central banks continue to claim that current elevated inflation is transitory. This is partly to reassure markets that monetary policy will not tighten (or not by much). But higher inflation would only be transitory if central banks treated it as permanent. Inflation remained above target in all major economies over…

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Broad money growth slows – but

Broad money growth is slowing in the five largest world economies But, apart from in China, it remains rapid by historical standards The risk of sustained above-target inflation remains very much alive The last time I looked at broad money growth in the five largest world economies (the United States,…

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What surveys say about inflation

The Fed maintains that high US inflation is transitory UK and EA inflation is low, but is it measured correctly? Business and consumer surveys show higher EA inflationary pressures In an article in The Times on Monday 27th July, my former colleague Simon Ward is quoted arguing that current British inflation is rather higher than…

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El Salvador and Bitcoin – a silly decision

El Salvador has voted to make Bitcoin legal tender. It is difficult to see any rationale for this. In fact, it is a ridiculous move, highlighting President Bukele’s ignorance of economics In early June, the Congress of El Salvador, acting on a proposal from President Nayib Bukele, passed a law…

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Move along, nothing to see – the nonchalance of central banks

Inflation continues to accelerate in most advanced economies. This is true for both monthly and annual data, both headline and core. So why are central banks so sanguine about inflation developments? Recent months have, on the whole, seen inflation continue to accelerate in most of the large advanced economies. As…

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