I WAY underestimated the simplicity of ECB policy. I think that the terse monetary policy objective explains quite well the ECB’s announced stance on policy today: The primary objective of the ECB’s monetary policy is to maintain price stability. The ECB aims at inflation rates of below, but close to, 2% over the medium term. […]

The global inflation picture is heating up. On Google, a search of ‘inflation’ spanning the month of February 2011 gets 311,000,000. For one year ago, the same search parameters yielded 1,850,000 hits. Inflation’s on the monetary policy makers’ minds. But why? In the developed world, it’s a food and energy story! Seriously, look at German […]

Today the German Federal Statistics Office reported that the February Consumer Price Index is expected to mark a 2.0% (2.047% by my calculations, which is very close to a rounded 2.1%) annual pace in February 2011. This is simply a ‘flash’ print, and the Statistics Office was very careful to discount the fact that inflation […]

Bond markets are pricing in rate hikes this year by the ECB and the BoE. Both are inflation targeters, so which one should react first to a possible spike in oil prices? What’s your answer? (1) Neither. As FX appreciation and fiscal austerity pass through to domestic prices, the core will drag down the headline. […]

Ex-food and energy, inflation is at 0.9% for the past twelvemonth. Even if you include those in the longer measure, annual inflation has been 1.7%. (Recall that we paid an average of more than $3.00/gallon for most of the Spring of 2010, for instance.) There is a simple reason “everyone” expected higher numbers: they were […]

Eurointelligence cites a Die Zeit interview (the original interview here) with ECB central bank President Jean-Claude Trichet. Their take on it is quite interesting, which suggests that most are ‘wrong’ about the path of ECB policy. According to Eurointelligence: Central bankers are trained not to say anything of any relevance in long speeches or interviews, […]

The Federal Statistics Office reported that German consumer prices increased 0.2% on a seasonally-adjusted basis in October, translating into a 1.3% annual gain on a harmonized basis. German prices are very sticky, since the domestic economy doesn’t see the boom and bust cyclical behavior like that in other developed economies. However, inflation may headed north, […]

Hat tip Rebecca for this link to the Curious Capitalist Invariably, when we start debating jobs programs and stimulus spending, people start talking about the long-term problem of government spending. It raises our national debt, and could cause inflation down the road. But what is often overlooked when inflation is brought up, is that not […]

The great thing about Accounting Identities is that they must be true. The bad thing about Accounting Identities is that their truth is often trivial. Tim Duy notes the reality: We can’t all be net exporters The Greek crisis…is a reminder that global imbalances are still with us – and, if not corrected, will eventually […]

Today I was thinking about tightening cycles in emerging markets; and more specifically, about that in China. Because let’s face it, China matters. China matters to the rest of Asia via competition for export income. China matters to Europe via competition for jobs. China matters to Brazil via domestic production via imports. China matters. The […]