MACROECONOMICS by Marc Chandler
FX
A Mysterious Decline in Inflation…
In early 2005, Greenspan said that the fact that long-term rates were lower despite the Fed’s campaign to raise short-term rates was a “conundrum.” Many rushed to offer the Fed Chair an explanation of the conundrum, which given past cycles may not have been such an enigma in the first place.
Be it as it may, at the last September press conference, Yellen admitted that the decline in inflation was a
“mystery.” She said, “I can’t say I can easily point to sufficient set of factors that explain this year why inflation has been as low.”
However mysterious the decline in inflation is, Yellen does not appear to be embracing a structural view that has been offered by some of Fed officials, such as Governor Brainard. Yellen insists that transitory factors are behind the decline in inflation and that they
will diminish over time. She still sounds confident that over time, as
slack in the labor market is
absorbed, wages will rise, and businesses can be expected to pass on higher costs to consumers.
Yellen is interested in a very narrow issue.
The core PCE
deflator rose from 1.25% in July 2015 to nearly 2% in H2 16 and has subsequently fallen to 1.4%. This is Yellen’s focus. As core
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70
