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Tag Archives: inflation

A Monetarist Manifesto for the Covid-19 Era

Juan E. Castañeda (Director) and Tim Congdon (Chairman) of the Institute for International Monetary Research at the University of Buckingham write today: With the M3 velocity of circulation at 1.04, equilibrium nominal national income comes out as roughly $29,000b. …if nominal GDP needs to rise by 30% in a period of 18 months to two years, and if real output cannot go up in that period by more than, say, 8%, then the rest of the adjustment has to be seen in the price level. Continued boom...

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A Sugar High?

A lot of chatter about a sugar high coming from the passage of the American Rescue Plan, previous fiscal and monetary measures, combined with the increase in CPI inflation. Time to step back and assess. First, the chatter: Figure 1: Google Trends count for “Sugar High”, accessed 6/13/2021. Examples, here and here. Will the economy overheat? Will the overheating cause inflation? Will this cause the Fed to over-react so as to crash the economy (or will the financial imbalances cause a crash...

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Kevin Hassett Prediction: 7% y/y Inflation by December 2021

Remember this Kevin Hassett projection of Covid-19 deaths, from May 2020? Source: CEA archived. In this video, Kevin Hassett predicts (“almost for sure”) 7% year-on-year inflation by December. Figure 1: CPI – all (blue), and Hassett prediction of 7% y/y inflation for 2021 (brown square), and University of Michigan survey of consumers implied prediction (teal square), on log scale. Source: BLS via FRED, University of Michigan, and author’s calculations. This implies that month-on-month...

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One Year Ahead Expected CPI Inflation Rates

Coming down for June, according to the University of Michigan survey of consumers. Figure 1: CPI inflation year-on-year (black), median expected from Survey of Professional Forecasters (blue +), median expected from Michigan Survey of Consumers (red), median from NY Fed Survey of Consumer Expectations (light green), forecast from Cleveland Fed (pink). Source: BLS, University of Michigan via FRED, Reuters, Philadelphia Fed Survey of Professional Forecasters, NY Fed, and Cleveland Fed. The...

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Whither the Fed

I gave the UCSD economic roundtable lecture Friday June 11 on inflation and the future of the Fed. It summarizes quickly a number of themes from previous Grumpy writings, and if you enjoy videos you might find it fun. Youtube link in case the above embed does not work. I happened on the New York Fed website, proclaiming on its landing page that it is now"...dedicated to understanding and finding solutions to the numerous forms of inequality that communities of color experience and...

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Inflation: Three Event Studies

The surprise in inflation for the March, April, and May reference month releases induced respectively 2, 4, and 6 basis point upward moves in the 5 year inflation breakevens — hardly earthshaking. Figure 1: Five year inflation breakeven calculated as five year Treasury yield minus five year TIPS yield (blue), five year breakeven adjusted by inflation risk premium and liquidity premium per DKW, all in %. Source: FRB via FRED, Treasury, KWW following D’amico, Kim and Wei (DKW) accessed 6/4,...

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The end of “the end of inflation”

This spring's spurt of inflation clearly already means one thing: The end of "the end of inflation." For 25 years inflation has seemed stuck on a downward trend. Those of us who worry about it seemed like end-of-the-world sign-holders that couldn't leave the 1970s behind. It's hard to buck the trend. A famous economist advised me to give up studying inflation -- inflation is 2%, he said, that's all you need to know. Apparently a new constant of nature. Well, apparently not....

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Interpreting Inflation Rates for May

May CPI inflation surprised on the upside, with month-on-month 0.6% vs 0.4% (not annualized) Bloomberg consensus, year-on-year 5% vs 4.7%. Note that May’s 0.6% month-on-month is below April’s 0.8%, highlighting the decline in high-frequency inflation. We have the following readings on inflation (month-on-month): Figure 1: Month-on-month annualized inflation from CPI-all urban (blue), from personal consumption expenditure (PCE) deflator (black), chained CPI (brown), sticky price CPI...

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Three inflations

 The latest inflation numbers are out, up 0.64% from April to May (7.7% annualized), on top of 0.77% (9.2% annualized) from March to April.To get around the base controversy, I like to plot the level of the CPI: The graph suggests that  "reflation" from the pandemic recession was over last year, we had been back to the usual growth, and now we're embarked on something new. Inflation is not the same everywhere. For another purpose I broke inflation down to durable goods...

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