Firms' Inflation Expectations: Not Unanchored, but Perhaps Unsettled?

Interesting read by the #FederalReserveAtlanta:

atlantafed.org/blogs/macroblo…
"Said another way, the current bout of high inflation is unusual in many different ways, and how it will play out remains fraught with uncertainty. Firms' short- and long-run expectations have risen sharply, and longer-run expectations show a clear rise in the average firm's...
probability distribution, to the extent that nearly one-third of the weight is being assigned to anticipated cost increases greater than 5 percent. So as we continue to delve further into these expectations and monitor upcoming developments,...
we're left pondering the question: is this how "unanchoring" begins?"

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More from @RonStoeferle

Aug 9
I'm reading everything that #ZoltanPozsar puts out for many years...His latest piece "War and Interest Rates" (August 1st) was a true masterpiece...Here are some highlights in a #thread🧵:
War is inflationary

....Wars come in many different shapes and forms. There are hot wars, cold wars, and what @DrPippaM calls hot wars in cold places – cyberspace, space, and deep underwater (see here). ...

Inflation did not start with the hot war in Ukraine…
the low inflation world stood on three pillars:
first, cheap immigrant labor keeping service sector wages stagnant in the U.S.; second, cheap goods from China raising living standards amid stagnant wages; third, cheap Russian gas powering German industry and the EU more broadly.
Read 18 tweets
Apr 29
US Yield Curve Control ahead?

The Federal Reserve conveniently provided itself with the legitimation for future yield curve control:
„The period 1942-47 provides some evidence that the Federal Reserve can lower long-term rates by committing to keeping short-term rates low. The brief period from 1947 to 1948 may also...
provide additional evidence that long rates can be reduced by direct interventions in the market for long-term Treasuries.“ Source: federalreserve.gov/monetarypolicy…
Read 5 tweets
Mar 14
As the first rate hike of this new (imho very short) rate hike cycle is getting closer, let's have a look at the performance of the #USD, #commodities and #gold before and after the first hike:
Will the #USD rally? Not necessarily..

The period prior to a US tightening shows a rally in the USD but very often weakens in the 6-month period following the first hike....
What about #commodities? Consensus would tell us that raising rates will cause commodities to sell off.

Not really. ..The first rate hike proved to be close to the bottom for the 2015 cycle, and all cycles were higher a couple of months out...
Read 7 tweets
Mar 16, 2020
Some very random thoughts on most recent developments here in Austria and in financial markets...
1. I am not scared of #COVIDー19 but rather the disastrous consequences for businesses, capital markets and employees...
2. Although monetary and fiscal stimulus will be huge, it won’t be enough.... we'll soon see who has been swimming naked...People do not see the consequences for illiquid investments like VC, real estate, art,...yet! VaR risk models will come back and hit us like boomerangs.
Read 18 tweets

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