Tag Archive: CPI

If the Fed’s Not In Consumer Prices, Then How About Producer Prices?

It’s not just that there isn’t much inflation evident in consumer prices. Rather, it’s a pretty big deal given the deluge of so much “money printing” this year, begun three-quarters of a year before, that consumer prices are increasing at some of the slowest rates in the data.

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Inflation Hysteria #2 (Slack-edotes)

Macroeconomic slack is such an easy, intuitive concept that only Economists and central bankers (same thing) could possibly mess it up. But mess it up they have. Spending years talking about a labor shortage, and getting the financial media to report this as fact, those at the Federal Reserve, in particular, pointed to this as proof QE and ZIRP had fulfilled the monetary policy mandates – both of them.

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Deflation Returns To Japan, Part 2

Japan Finance Minister Taro Aso, who is also Deputy Prime Minister, caused a global stir of sorts back in early June when he appeared to express something like Japanese racial superiority at least with respect to how that country was handling the COVID pandemic.

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Where Is It, Chairman Powell?

Where is it, Chairman Powell? After spending months deliberately hyping a “flood” of digital money printing, and then unleashing average inflation targeting making Americans believe the central bank will be wickedly irresponsible when it comes to consumer prices, the evidence portrays a very different set of circumstance.

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Meanwhile, Outside Today’s DC

With all eyes on Washington DC, today, everyone should instead be focused on Europe. As we’ve written for nearly three years now, for nearly three years Europe has been at the unfortunate forefront of Euro$ #4. We could argue about whether coming out of GFC2 back in March pushed everything into a Reflation #4 – possible – or if this is still just one three-yearlong squeeze of a global dollar shortage.

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FX Daily, September 30: Nervous Calm

Quarter and month-end considerations could be overwhelming other factors today.  Turnaround Tuesday saw early gains in US equities fade.  Asia Pacific shares were mixed, with the Nikkei (-1.5%) and Australia (-2.3%) bear the brunt of the selling, while China, Hong Kong, Taiwan, and India rose.

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Inflation Karma

There is no oil in the CPI’s consumer basket, yet oil prices largely determine the rate by which overall consumer prices are increasing (or not). WTI sets the baseline which then becomes the price of motor fuel (gasoline) becoming the energy segment. As energy goes, so do headline CPI measurements.

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Fama 2: No Inflation For Old Central Banks

The Bureau of Labor Statistics reported that the core CPI in July 2020 jumped by the most (+0.62%) in almost thirty years. After having dropped month-over-month for three months in a row for the first time in its history, it has posted back to back gains the latest of which pushing the index back above its February level.

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Transitory, The Other Way

After a record three straight months of decline for the seasonally-adjusted core CPI March through May 2020, it turned upward again in June. Buoyed by a partially reopened economy, the price discounting (prerequisite to the Big D) took at least one month off.

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A Big One For The Big “D”

From a monetary policy perspective, smooth is what you are aiming for. What central bankers want in this age of expectations management is for a little bit of steady inflation. Why not zero? Because, they decided, policymakers need some margin of error. Since there is no money in monetary policy, it takes time for oblique “stimulus” signals to feed into the psychology of markets and the economy.

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What Happens When Central Banks Buy Stocks (ETFs)? Well, We Already Know

Can we please dispense with all notions that monetary policy works? Specifically balance sheet expansion via any scale asset purchase programs. Nowhere has that been more apparent than Japan. Go back and reread all the promised benefits from BoJ’s Big Bang QQE that were confidently written in 2013. The biggest bazooka ever conceived has fallen short in every conceivable way.

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If Trade Wars Couldn’t, Might Pig Wars Change Xi’s Mind?

Forget about trade wars, or even the eurodollar’s ever-present squeeze on China’s monetary system. For the Communist Chinese government, its first priority has been changed by unforeseen circumstances. At the worst possible time, food prices are skyrocketing. A country’s population will sit still for a great many injustices. From economic decay to corruption and rising authoritarianism, the line between back alley grumbling and open rebellion is...

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China’s Dollar Problem Puts the Sync In Globally Synchronized Downturn

Because the prevailing theory behind the global slowdown is “trade wars”, most if not all attention is focused on China. While the correct target, everyone is coming it at from the wrong direction. The world awaits a crash in Chinese exports engineered by US tariffs. It’s not happening, at least according to China’s official statistics.

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CPI Changes On Energy: The Inflation Check

After constantly running through what the FOMC gets (very) wrong, let’s give them some credit for what they got right. Though this will end up as a backhanded compliment, still. After having spent all of 2018 forecasting accelerating inflation indices, from around New Year’s Day forward policymakers notably changed their tune.

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Why The Japanese Are Suddenly Messing With YCC

While the world’s attention was fixated on US$ repo for once, the Bank of Japan held a policy meeting and turned in an even more “dovish” performance. Likely the global central bank plan had been to combine the Fed’s second rate cut with what amounted to a simultaneous Japanese pledge for more “stimulus” in October. Both of those followed closely an ECB which got itself back in the QE business once more.

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Big Difference Which Kind of Hedge It Truly Is

It isn’t inflation which is driving gold higher, at least not the current levels of inflation. According to the latest update from the Bureau of Economic Analysis, the Federal Reserve’s preferred inflation calculation, the PCE Deflator, continues to significantly undershoot. Monetary policy explicitly calls for that rate to be consistent around 2%, an outcome policymakers keep saying they expect but one that never happens.

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The Path Clear For More Rate Cuts, If You Like That Sort of Thing

If you like rate cuts and think they are powerful tools to help manage a soft patch, then there was good news in two international oil reports over the last week. The US Energy Information Administration (EIA) cut its forecast for global demand growth for the seventh straight month. On Friday, the International Energy Agency (IEA) downgraded its estimates for the third time in four months.

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When Verizons Multiply, Macro In Inflation

Inflation always brings out an emotional response. Far be it for me to defend Economists, but their concept is at least valid – if not always executed convincingly insofar as being measurable. An inflation index can be as meaningful as averaging the telephone numbers in a phone book (for anyone who remembers what those things were).

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China’s Big Money Gamble

While oil prices rebounded in January 2019 around the world, outside of crude commodities continued to struggle. According to the World Bank’s Pink Sheet, base metal prices fell another 1.8% on average from December. On an annual basis, these commodities as a group are about 16% below where they were in January 2018.

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It’s Not That There Might Be One, It’s That There Might Be Another One

It was a tense exchange. When even politicians can sense that there’s trouble brewing, there really is trouble brewing. Typically the last to figure these things out, if parliamentarians are up in arms it already isn’t good, to put it mildly. Well, not quite the last to know, there are always central bankers faithfully pulling up the rear of recognizing disappointing reality.

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