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…

Continue reading

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…

Continue reading

Factored in – but how high and for how long?

Markets have woken up to the inflation risk Central bankers, however, display less concern But markets may still underestimate the extent of coming inflation  Bond yields have begun to rise and equity markets have fallen, both developments apparently because market actors have woken up to the risk of higher inflation.…

Continue reading

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…

Continue reading