James Alexander via Historinhas | You have to feel for ECB President Draghi sometimes. He’s trying to steer a huge and dysfunctional ship. His heart is in the right place, but he has far too much faith in the interest rate and credit channel “instruments” for the management of monetary policy. They have prevented further recessions and do seem to have the Euro area on the right track, but it is painfully slow and risky .
The day after Draghi warned about greater than expected weakness in Eurozone inflation data, Spain’s final October inflation number has been published, confirming the -0.7% year-on-year preliminary figure. But despite the fact inflation remains in negative territory, the CPI rose 0.6% month-on-month.
Since the Eurozone’s recovery started two years ago, the number of people in work has grown in all EU member states individually during the last seven quarters. In Q2’15 it expanded by 1.9% on a y-o-y basis.
Benjamin Cole via Historinhas | Motor vehicle sales are booming in the United States, up 10% in the last year, and double since the Great Recession. Thanks to blogger Kevin Erdmann of Idiosyncratic Whisk, we have a better understanding of inflation in the U.S. and the role that ubiquitous local property zoning plays in suffocating supply, and thus boosting price.
BARCLAYS | Headline inflation surprised slightly to the downside while core prices increased more than we had expected. At the non-core level, energy inflation remains weak (-8.7%). At the core level, both non-energy industrial goods (NEIG) and services prices increased by 0.1pp, to +0.4% and +1.3%, respectively, and leading the unexpected 0.1pp rise in core inflation.
James Alexander via Historinhas | Yet again today we saw the “zero (long and variable) lags” in monetary policy. Central bankers moving markets and thus changing NGDP Expectations happens all the time. It’s perfectly rational too.
PARIS | Francesco Saraceno | What I’d like to express here is my jealousy for the discussions (and the confrontation) that we observe in the US about rate rises. These discussions are a sideproduct, a very positive one if you ask me, of the institutional design of the Fed.
In December 1985, Thomas Sargent spent some time in Brazil, giving speeches and talking to policymakers. Back home in January 1986, he published in the WSJ an Open Letter to the Brazilian Finance Minister: …When you have exhausted all of your opportunities to borrow, you will have to make one or more of unpleasant adjustments such as taxes rises, government expenditures cuts or default on some of you debt…
On face value, the ruthless tools used by central bankers to inject piles of money into the economy point to a brand new way of conducting monetary policy. Never before, except for in wartime, did they dare to trigger such massive asset-buying programmes. And never before did they so blatantly disregard the future risks a huge liquidity glut might fuel.
BARCLAYS | We have been arguing for some time that we see no grounds for attaching a high probability to a reflation scenario for the euro area, at least in the near term