Average inflation targeting > higher inflation

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…

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Changing policy mix to exacerbate 2019 slowdown

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…

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Don’t underestimate central banks’ determination to normalise policy

• 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…

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