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Dario Perkins Profile picture
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Oct 21 • 4 tweets • 2 min read
Read the Broadbent speech. It says - not very subtly - that the bond market is waaaayyyy too hawkish on BoE.
maybe some common sense has prevailed #pivot

bankofengland.co.uk/speech/2022/oc…
far more than "optimal" monetary tightening is priced in (not-so-subtle hint number 1)
The tightening that is priced in, would KILL the economy (not-so-subtle hint number 2)
first the RBA, then the BoE.. MAYBE central banks are beginning to realize that it is better to give up chasing the Fed & just let their currencies go, rather than totally blow up their domestic economies (and then see their currencies go anyway)

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More from @darioperkins

Dario Perkins Profile picture
Oct 2
Yes, the BoE stepped in very quickly last week, even though they didn't see the problem coming & maybe didn't understand it at first. Huge contrast with 2008 when CBs were totally naive to systemic risk in markets. No worried about moral hazard either
And CBs generally have a better understanding of what banks are doing than non-banks. My friend here is joking, but the substantive point is that regulators have had plenty of warning (unlike in 2008)
Or, put another way 😆
Read 4 tweets
Dario Perkins Profile picture
Oct 1
1/ Crazy week, mostly spent answering questions from non-UK investors like "what the heck is going on over there". Nice for the UK to be relevant again, I guess. 😆 Some thoughts:
2/ global context matters. Rapid monetary tightening, especially from Fed, has changed whole mood music in markets. Risk premia widen & its harder to get away with dumb stuff. Every Fed tightening cycle causes problems in RoW, but EMs usually at epicentre
3/ In this environment, mkts pay more attention to shaky finances, incoherent/contradictory policies & bad politics. Meanwhile the strong USD always has the effect of "sucking all the oxygen out of the room" h/t @kevinmuir
Read 8 tweets
Dario Perkins Profile picture
Sep 21
An eclectic approach to macro:
- Keynes told us fiscal policy would definitely *work*
- MMT told us we could afford it
- monetarism predicted inflation at 40 year highs
- nobody has a clue what comes next (or what to do about it...)
😆
So here is a wild proposition: fiscal policy is super effective when inflation is low & monetary policy is super effective when inflation is high. After a century of alternating these two policy levers between their polar extremes, how about we find a way to combine them?
1920s-40s - monetary policy dominates, ends in deflation
1940s-70s - fiscal dominates, ends with inflation
1970s-2010- monetary dominates, ends with lowflation
2020s..... pendulum has swung again
Read 4 tweets
Dario Perkins Profile picture
Aug 19
Impressive collapse in New Zealand households' 5-year inflation expectations. Until you see they discontinued the series and changed to a new - much lower - one 😆
maybe the BoE, the Fed and the ECB should try this
the Bundesbank needs to urgently "discontinue" this s***, because things getting out of hand
Read 4 tweets
Dario Perkins Profile picture
Aug 4
BoE now forecasting a recession and 13% inflation. Lovely...
🫤
Read 4 tweets
Dario Perkins Profile picture
Jun 27
The @BIS_org on a possible "paradigm shift" in inflation
BIS guide to hard and soft landings
there is a whole chapter in the BIS annual report about high vs low inflation regimes. Here are the charts:
bis.org/publ/arpdf/ar2…
Read 7 tweets

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