The new policy of average inflation targeting involves a loss of clarity. Its credibility is questionable. It means rather higher inflation than markets currently expect. Last month the Fed switched to alternative inflation targeting (AIT), a change covered in a Stein Brothers Comment at the time. However, the change bears…
Markets expect Chairman Powell to signal a shift towards ‘average inflation targeting’ AIT makes sense in many ways, but also has weaknesses The medium-term effect will be an acceptance of higher inflation Later today, Fed Chairman Jerome Powell will address (virtually, needless to say) the annual Kansas City Federal Reserve…
Output growth in the second half of 2020 and 2021 is likely to be well above trend Current inflation data is meaningless, but 2021 and 2022 will see high inflation This assumes that global lockdowns end over the summer This is a follow-up to The case for higher inflation published…
The latest Fed minutes imply that QT may end in late 2019 This is good news for the US economy (and President Trump) in 2020 It also has implications for how future QE may be undertaken After a weak second half in 2018, US broad money developments have picked up.…
Business and consumer confidence have recently deteriorated after a strong 2018 Levels are still high, but the trend is worrying Continued falls would imply a longer and deeper downturn in 2019 One of the peculiar developments for much of 2018 was that, while broad money growth slowed substantially (something we…
The Bank of England has outlined the economic consequences of Brexit It has failed to apply a ‘plausibility test’ to its results This actually helps hard-line Brexiteers, as well as those who would erode central bank independence Yesterday (28th November, 2018), the Bank of England published a report called ‘EU…
The global policy mix is shifting from loose monetary/tight fiscal to loose fiscal/tighter monetary This will exacerbate the 2019 slowdown already heralded by monetary data Financial assets will suffer For much of the post-Great Recession era, economic policy in most major economies has been characterised by a mix of tight…
After one year of QT, the Fed’s balance sheet has slimmed by just over $300bn (-6.6%) Although the US government deficit has widened, broad money growth has halved The Fed will still raise interest rates in December; but ‘three hikes in 2019’ is no longer on Last week, we had…
• The Fed remains set to raise interest rates in 2018 and 2019 • Weaker outlook elsewhere has caused speculation that other central banks won’t shift policy • But this ignores central banks’ desire to exit unconventional measures Headline US inflation (the personal consumption expenditure deflator, PCE), reached 2% in the…
The European Commission apparently wants to lay its hands on the ECB’s profits. This is a bad and probably unworkable idea and is unlikely to happen. It does highlight the EU’s post-Brexit money problem. According to the Financial Times, the European Commission is considering appropriating the ECB’s profits in order…
