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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Prepare for central bank regime change

Inflation-targeting independent central banks have a longer history than most CB regimes Market complacency that current regimes will remain is probably too optimistic Most new regimes mooted mean higher, more volatile inflation and thus lower growth Central bank and monetary policy regimes last longer than expected, but also change faster…

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Money data say, replace cautious optimism with guarded pessimism

Over winter, broad money growth in the largest developed markets has slowed down At the same time, the growth of US large time deposits has slumped If maintained, current money trends point to below-trend growth and weaker asset prices In early January we wrote that broad money growth in the…

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