Inflation expectations down – Cleveland Fed
It’s interesting to note how much of decline in the Cleveland Fed’s measure of inflation expectations came before the latest round of market turmoil.
Rising inflation expectations might push Colombia’s central bank to raise rates from their record low. Minutes released today said that short-term expectations were in the upper half of their target range, while long-term expectations (5 to 10 years) “surpassed the ceiling of that range”. The bullish sentiment was tempered, however, by uncertainty:
The points [the members of the Board] stressed as being fundamental for an eventual hike in the intervention interest rate are, among others, growing upward inflation expectations above the target range, the important momentum in internal demand, high asset prices, and the accelerated build-up in lending.On the other hand, low core inflation levels and the recent relative stability in prices for non-tradable goods, excluding food and regulated items, the possible temporary nature of the increase in food prices, the unstable situation with respect to the sovereign debt of several European countries, and the lack of certainty surrounding the forecasts for inflation and growth in the months ahead were underscored as factors in favor of keeping the rate at its present level. Read more
Almost half of leading economists believe the Bank of England has lost credibility in its inflation forecasts – a withering assessment of the central bank’s achievement of inflation control.
After the Bank persistently underestimated the strength of price pressures in the past three years, 34 out of 78 economists, or 44 per cent, said the credibility of its forecasts had been damaged by the inflationary overshoot. The most recent figure for inflation was 3.3 per cent in November, double the 1.5 per cent the Bank was forecasting as recently as February 2010. Read more
Inflation expectations up – Cleveland Fed
The Cleveland Fed has updated its inflation expectations model after the release of the November CPI. It shows a tidy rise across all time horizons.
At the ten year horizon, inflation expectations rose to 1.64 per cent from 1.51 per cent, an improvement but still well below the 2 per cent that prevailed earlier this year when nominal yields were last at this level. The same holds true for 10yr TIPS spreads: Read more
Some fiscal help for Bernanke
Conventional wisdom in Washington is that Ben Bernanke, Federal Reserve chairman, is pretty much alone in his quest to deliver a jolt to the US recovery.
With concerns about the deficit running rampant, Congress is unlikely to push through any significant fiscal stimulus anytime soon, particularly if there is a shift in power with strong Republican gains in the midterm congressional elections. As much as the Obama administration may want to move forward with new economic programmes, it is clearly hamstrung by the headwinds on Capitol Hill.
But not all may be lost…..
A research note by Michael Feroli, economist at JPMorgan, just highlighted some interesting ways in which fiscal policy could achieve what Charles Evans, president of the Federal Reserve Bank of Chicago, recently described as a crucial policy objective: lower short term real interest rates. Read more
| About this blog | Blog guide |
Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
