MADRID | By The Corner | Experts at JPMorgan are less worried about near-term disturbances and flows and more about the medium-term outlook for economic growth. Over the past three years, the world economy has grown only at a 2.5% pace, below potential and thus not able to make up for what we lost in the recession. Each year, they keep forecasting that growth will rise to a 3% handle, but have been steadily disappointed.
SAO PAULO | By Marcus Nunes via Historinhas | David Beckworth has a very good article “Inflation Targeting – A monetary regime whose time has come and gone.” A very short summary of the argument is given here: “What, then, would characterize a robust monetary-policy regime? Based on the discussion above, it would be one that does not respond to supply shocks, but does vigorously respond to demand shocks.
WASHINGTON | By Pablo Pardo | Mark Zandi is chief economist at Moody’s Analytics, the department in charge of consulting, advising and providing services for businesses and financial institutions. Among its many activities, the firm advices several European banks with regard to the EBA’s and ECB’s stress tests. Moody’s created this department in 2007, after buying Economy.com –Zandi’s analysis company.
MADRID | The Corner | Inflation in Brazil hit the upper limit of the government’s target for the first time in a year in June: consumer prices rose by 6.52% yoy (IPCA index), airlines’ fares skyrocketed because of the World Cup (almost 22% in June from May). But let’s be fair: only half of the monthly inflation came from the football competition. And prices will remain far from the 4.5 percent target beyond 2015 unless the central bank rises rates further.
LONDON | By The Corner | Cross-economy inflation readings have surprised to the top side, according to Barclays experts. This has occurred despite analyst forecasts for a pick-up in the pace of price increases. These surprises have been – like the downside surprises of the past couple years – remarkably broad based. They also began before the start of the recent rise in oil prices.
MADRID | The Corner | While the European inflation remained at 0.5%, credit steeply contracted in May thus neutralising the tepid improvement of the lending activity during March and April, according to Afi. The decline in private credit accelerated in small peripheral countries, but it continued the same in Spain and Italy.
LONDON | By Barclays analysts | Euro area “flash” June HICP remained unchanged at 0.5% y/y, in line with our and consensus expectations. Printing 0.51% y/y at two decimal places (very close to our 0.50% y/y estimate), today’s outturn is technically only very slightly higher than last month (0.49% y/y) and March (0.47% y/y). It remains nonetheless very weak indeed.
MADRID | By Luis Arroyo | The Spanish National Statistical Institute has recently published May’s CPI. The chart shows the 0.1% annual variation with respect to May 2013. Such variations determine a curious outcome on the price level, as the second chart exhibits.
NEW YORK | By Benjamin Cole at Historinhas | The recent historical and empirical record strongly suggests central bank quantitative easing (QE) works. The riddle is whether both the Japan and U.S. economies will slip into stagnation again without QE, as long as there is a global glut of capital holding down interest rates, and inflation is dead—or even if inflation is near 2 percent on the PCE deflator, the putative Fed target. The riddle might even be reframed: When central banks do not conduct QE, are they actively engaged in monetary asphyxiation?
MADRID | By The Corner | Barclays analysts highlight the scarce impact of the European Central Bank’s measures on the inflation expectations. This is the chart that Barclays uses to show the inflation expectations one year before and one year after ECB’s decision.