The ECB has announced that it won’t tolerate unjustified changes in financing conditions. Neither the ECB, nor any other central bank, can know what unjustified changes are. The ECB’s behaviour opens the door for politicians to interfere in markets as well. Central banks in most western economies have for many…
Central banks enjoy a reputation of, if not omniscient omnipotence, at least competence The current bout of inflation has shown that the omniscient omnipotence is absent It also risk showing a lack of competence, if they do too much – or too little Central banks have long enjoyed a high…
The Fed will imminently begin to slim its balance sheets. Other central banks will follow Quantitative tightening may shrink money supply But the main impact is likely to be upward pressure on bond yields for a very long time The Federal Reserve will soon begin to seriously slim its balance sheet. It…
Survey data show surging inflation expectations Central banks’ monetary ignorance meant they failed to manage inflation both below and above target This double failure adds to the threats to central bank independence Central banks spent much of 2020 believing that there would be no increase in inflation in spite of…
Broad money growth in the ‘inflation-hit west’ is slowing The implication is that inflation will ease, though probably not earlier than H2 Central banks face a new dilemma; they still need to tighten policy, but not by too much Over the turn of the year, broad money growth in the…
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…
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…
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…
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…
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…
