tag:blogger.com,1999:blog-5713178645208582139.post4493975294997998330..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: Inflation Targeting Gets Another Black EyeDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-5713178645208582139.post-47595593572918377772011-03-10T10:09:27.123-06:002011-03-10T10:09:27.123-06:00as a follow-up question, why, exactly, do you thin...as a follow-up question, why, exactly, do you think that the ECB would do anything other than "cater to German needs"?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-49942022390143641832011-03-10T10:07:54.978-06:002011-03-10T10:07:54.978-06:00i'm not debating whether or not it's a pol...i'm not debating whether or not it's a policy mistake - i'm debating whether or not the move in asset prices suggests financial markets think it's a mistake, which is what you claimed ("markets responded as they did...[because] They know that a rate hike in the current environment will only serve to make matters worse").Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-75503386745106793902011-03-10T10:01:52.847-06:002011-03-10T10:01:52.847-06:00I point to peripheral yields, low core inflation, ...I point to peripheral yields, low core inflation, stable inflation expectations, below trend NGDP growth, and the obvious fact that the Eurozone is still in crisis. Do you really think that tightening monetary policy given the above makes sense? <br /><br />The only place in Europe where tightening might make sense is in Germany. It seems, then, the ECB is once again catering to German needs David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-1244322552260249152011-03-10T03:42:31.896-06:002011-03-10T03:42:31.896-06:001) eurostoxx finished higher on the day
2) so did ...1) eurostoxx finished higher on the day<br />2) so did TW EUR<br />3) rates rose across the curve (not just the short-end)<br />4) implied vols fell<br /><br />none of the above is consistent with a market that sees the CB making a policy mistake. <br /><br />you point to peripheral yields - but what do you think the liquidity is in cash govies compared to the markets i mentioned above?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-85253913630051598822011-03-09T16:16:56.387-06:002011-03-09T16:16:56.387-06:00See here: http://www.telegraph.co.uk/finance/econo...See here: http://www.telegraph.co.uk/finance/economics/8372004/EU-paralysis-drives-fresh-bond-rout.htmlDavid Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-64114759099452975462011-03-09T09:05:25.805-06:002011-03-09T09:05:25.805-06:00This comment has been removed by the author.MW@Workhttps://www.blogger.com/profile/09340935651423814883noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-33805197446154394892011-03-08T08:05:45.643-06:002011-03-08T08:05:45.643-06:00Anonymous:
"Investors get paid to see the wo...Anonymous:<br /><br />"Investors get paid to see the world the way it is, not as it should be."<br /><br />Exactly. That is why markets responded as they did to Trichet's speech. They understood the dire implications of such a move. They know that a rate hike in the current environment will only serve to make matters worse in the Eurozone and are therefore pricing it into the David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-36197115014653473182011-03-08T02:04:17.042-06:002011-03-08T02:04:17.042-06:00i'm aware of that argument. so is the ECB. t...i'm aware of that argument. so is the ECB. the fact remains that they disagree, and target headline. arguing over what they SHOULD be doing instead is something i will leave to the academics. to borrow from jim grant, investors get paid to see the world as it is, not as it should be.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-72105416643472942532011-03-07T08:40:19.308-06:002011-03-07T08:40:19.308-06:00Anonymous:
Yes, the ECB does not target the core,...Anonymous:<br /><br />Yes, the ECB does not target the core, but that is the problem. Core inflation does a better job indicating where trend inflation is going. As noted by econsophism, headline inflation is misleading. Thus, I mentioned core inflation and expected inflation to show the focus on headline inflation is misguided.<br /><br />If a central bank is going to do inflation targeting-David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-34959643338597175972011-03-07T05:41:09.681-06:002011-03-07T05:41:09.681-06:00The CPI is a noisy measure of inflation because f...The CPI is a noisy measure of inflation because food and energy have relatively high variance. Core inflation is a more reliable indicator in any given month of the central tendency in prices than the full CPI. <br /><br />So if one wants to stabilize the full CPI, basing decisions on core CPI might be the way to go. That way one isnt chasing transient spikes and dips in volatile components, Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-37904476098728858032011-03-07T04:39:06.428-06:002011-03-07T04:39:06.428-06:00as the ECB does not target core inflation, what do...as the ECB does not target core inflation, what does low core inflation have to do with their decision?Anonymousnoreply@blogger.com