Ben Chu Profile picture
12 May, 7 tweets, 3 min read
BREAKING: US consumer price inflation for April comes in at 4.2% y/y - above average estimate of economists polled by Reuters of 3.6%

Core inflation 3% y/y vs estimate of 2.3%
👇
....Highest rate of inflation in US seen since Sep 2008...
...in response, 10 year US Treasury yields up a couple of basis points to 1.645%...

dollar index spikes...

Suggest markets pricing in possibility of Fed rate hike sooner than expected...
...Manifestly big base effects at work - look at those massive y/y energy price rises (reflecting price slumps at the height of the pandemic/lockdowns)...bls.gov/news.release/c…
...though also true that core inflation (excluding energy prices) also up sharply, highest reading since 1996...
...So the $20 trillion question: should the Federal Reserve/the world be getting worried about US inflation?

Answer: Probably not yet.

Short-term spikes in prices are consistent with supply bottlenecks created by booming economy coming out of severe slump....
...time to worry is when high inflation expectations become baked in among public & Fed shows unwillingness/inability to act in response - no sign of that yet.

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More from @BenChu_

14 May
European official data (Eurostat) and UK official data (ONS) have shown a somewhat different picture on post-Brexit trade patterns.

🚄🚚🇬🇧🇪🇺

What's going on?

A thread...1/11
...the Eurostat data shows a significantly larger fall in UK to EU goods exports than the ONS data

(Note: this comparison doesn't include March - Eurostat data for that month isn't out yet though ONS's is)...3/11

... Image
Read 12 tweets
13 May
The idea stronger growth this year means Sunak can cancel future tax rises seems confused to me - or at least an incomplete analysis.

Brief thread 🧵

Assuming no public spending changes, when it comes to pressure for tax rises to balance spending with tax revenues...
....what matters is the projected structural deficit *after* the recovery is complete.

And what determines *that* will be the scale of long-term scarring to GDP (i.e the level of GDP relative to pre-crisis expectations)...

The Bank is currently projecting 1.25% GDP scarring... Image
....A faster recovery to a lower (scarred) path of GDP doesn't change the size of the post crisis structural deficit & longer term pressure for tax rises.

For that to happen you need projections of lower scarring...
Read 6 tweets
12 May
Does Boris Johnson’s adult skills "revolution" really add up?

🪛📚👴💵👨‍🏫

A thread…1/21
...The rhetoric is certainly there from the PM.

And we hear about legislation for a “lifetime skills guarantee” in the Queen’s Speech and assume the action is following.

But is it?...2/21

gov.uk/government/new…
...First, it’s worth stressing why this matters.

The OECD estimates around 9m adults in England have low basic skills, with 5 million of them in work...3/21

oecd-ilibrary.org/education/rais…
Read 21 tweets
7 May
In the wake of the Bank of England’s latest forecasts the media is full of talk of an economic “boom”.

💥💵📈

One headline this morning even calls it a *supersonic* boom.

What to make of that kind of talk?

A thread…🧵
...It’s true GDP growth of 7.25%, the Bank's latest forecast for 2021, would be the largest calendar year expansion since 1941 when Britain was still scaling up production to fight the Nazi menace...2/
...But, as we shouldn’t need reminding, this follows the worst year for the economy in three centuries in 2020...3/
Read 17 tweets
6 May
As expected, no change in Bank of England rates or QE target - but MPC has decided to slow the rate of its asset purchases so they stretch out to the end of the year

bankofengland.co.uk/-/media/boe/fi…
MPC now sees UK economy running 0.5% of GDP above capacity by Q2 2022 (up from 0.25% previously) - a hawkish signal
Sterling up in wake of MPC forecast - suggests a hawkish interpretation
Read 6 tweets
5 May
Biden Administration *is* backing vaccine patent waivers

Announcement here 👇
..It's a bold move - and many of the experts I spoke to last week were doubtful it would happen.

But will it actually help overcome the pandemic?

Thread here lays out the arguments for and against 👇

...Vaccine makers' shares have taken a plunge in the wake of the announcement
Read 4 tweets

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