inflation
Union over the line on numbers voting – and result expected to be in favour of industrial action Teachers are set to go on strike for decent pay after enough members returned ballots to meet the ‘50% plus one’ turnout threshold required under the government’s anti-union laws, according to reports Skwawkbox has received. The percentage […]
“What is a debt, anyway? A debt is just the perversion of a promise. It is a promise corrupted by both math and violence.” David Graeber, Debt: The First 5,000 …
The post Don’t let the black hole debt doomsters suck us in with their lies. Enough is enough. appeared first on The Gower Initiative for Modern Money Studies.
In a January 2022 post, we first presented the Global Supply Chain Pressure Index (GSCPI), a parsimonious global measure designed to capture supply chain disruptions using a range of indicators. In this post, we review GSCPI readings through December 2022, and then briefly discuss the drivers of recent moves in the index. While supply chain disruptions have significantly diminished over the course of 2022, the reversion of the index toward a normal historical range has paused over the past three months. Our analysis attributes the recent pause largely to the pandemic in China amid an easing of “Zero COVID” policies.
In a recent post, we introduced the Multivariate Core Trend (MTC), a measure of inflation persistence in the core sectors of the personal consumption expenditure (PCE) price index. With data up to February 2022, we used the MCT to interpret the nature of post-pandemic price spikes, arguing that inflation dynamics were dominated by a persistent component largely common across sectors, which we estimated at around 5 percent. Indeed, over the year, inflation proved to be persistent and broad based, and core PCE inflation is likely to end 2022 near 5 percent. So, what is the MCT telling us today? In this post, we extend our analysis to data through November 2022 and detect signs of a decline in the persistent component of inflation in recent data. We then dissect the layers of inflation persistence to fully understand that decline.
The Little Secret About Corporate Profits
Have you noticed that when workers get better wages, the media blames them for rising prices, but when corporations rake in record profits, there’s silence?
That’s because corporate profits aren’t tracked nearly as closely as worker wages. And the reason why comes down to power.
Every month we get measurements of prices, jobs, and wages — these are the three economic variables we hear repeatedly because they are released each month like clockwork.
There are four economic wildcards between now and the election, and we know exactly when each will be played.
The first is this Wednesday at 11.30am eastern time, when we get the official update on inflation. We’re likely to see a figure so large it will take many of us back to the 1990s, to a time before anyone under 30 was born.
With the exception of a short-lived blip following the introduction of the goods and services tax in 2000, inflation has scarcely been above 5% since 1990.
One of the stranger things about the Reserve Bank’s announcement of why it’s lifting interest rates by 0.25 percentage points is that it suggests inflation will come down by itself.
“A further rise in inflation is expected in the near term,” the RBA says, “but as supply-side disruptions are resolved, inflation is expected to decline back towards the target range of 2-3%.
So why raise rates now, for the first time in more than a decade? The bank says it is about "withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic”, which is fair enough.
But our latest burst of inflation is weird, and resistant to rate hikes. If the Reserve Bank isn’t careful, too many more rate hikes like this might help bring on a recession.
The biggest question relating to the management of the economy right now has nothing to do with next week’s budget. It has everything to do with the Reserve Bank and the board meetings that will follow it.
The question facing the board – the biggest there is when it comes to how the next few years are going to play out – is whether to hike interest rates just because prices are climbing.
On the face of it, it seems like no question at all. It is widely believed that that’s what the Reserve Bank does, mechanically. When inflation climbs above 3% (it’s currently 3.5%) the board hikes interest rates to bring it back down to somewhere within the bank’s target band of 2-3%.