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…
China’s population may have peaked in 2021. This is worrying, since population and labour force growth are key inputs in GDP growth. Monetary data also point to weaker trend growth going forward. In mid-January, there was an interesting news item from China. The number of children born in 2021 was…
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…
Broad money growth is slowing in the five largest world economies But, apart from in China, it remains rapid by historical standards The risk of sustained above-target inflation remains very much alive The last time I looked at broad money growth in the five largest world economies (the United States,…
The Fed maintains that high US inflation is transitory UK and EA inflation is low, but is it measured correctly? Business and consumer surveys show higher EA inflationary pressures In an article in The Times on Monday 27th July, my former colleague Simon Ward is quoted arguing that current British inflation is rather higher than…
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…
