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Ryding Faults Mishkin, `Core Craziness' at Fed: Chart of Day
By Thomas R. Keene
March 5 (Bloomberg) -- Federal Reserve policy makers cannot overlook rising oil and food prices and are wrong to dismiss a widely followed indicator of inflation expectations, Bear Stearns Cos. economists say.
``When is the Fed going to recognize that trends in energy and food prices, in part, have a U.S. monetary policy component?'' John Ryding, chief U.S. economist with Bear Stearns in New York, writes in a March 4 commentary. He describes as ``Core Craziness'' the Fed's focus on so-called ``core'' inflation, minus food and energy.
Ryding, writing with colleagues Conrad DeQuadros and Meghna Mittal, takes particular issue with comments made by Governor Frederic S. Mishkin yesterday concerning the recent rise in one indicator of inflation expectations, the five-year, five-year forward implied inflation breakeven.
Speaking before the National Association for Business Economics yesterday in Arlington, Virginia, Mishkin said: ``Does this rise in forward inflation compensation indicate that long-run inflation expectations have risen by a similar amount? My best guess is that much of the rise in inflation compensation reflects other factors.''
Ryding disagrees.
The chart of the day shows the five-year, five-year forward breakeven inflation rate as constructed by economists Refet S. Gurkaynak, Brian Sack and Jonathan H. Wright. The series shows the difference between nominal and inflation-indexed yields of the five-year forward rate, five-years from now. Note the persistent rise in inflation expectations, and the abrupt surge beginning early this year.
`Troubling' Indicator
``In dismissing what is perceived as an important and potentially troubling inflation indicator, the Fed could lose the bank end of the treasury yield curve and actually push the long-term yields higher -- thus raising mortgage rates,'' writes Ryding.
In his speech, Mishkin said he expects ``inflation pressures to wane over the next few years, as product and labor markets soften and the rise in food and energy prices abates.'' He forecasts core inflation will ``move back to around 2 percent'' from the current 2.3 percent.
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no frigging way if the dollar keeps falling.
"core inflation"... what bullshit. these idiots ever heard of a rolling average to smooth volatile data?
By Thomas R. Keene
March 5 (Bloomberg) -- Federal Reserve policy makers cannot overlook rising oil and food prices and are wrong to dismiss a widely followed indicator of inflation expectations, Bear Stearns Cos. economists say.
``When is the Fed going to recognize that trends in energy and food prices, in part, have a U.S. monetary policy component?'' John Ryding, chief U.S. economist with Bear Stearns in New York, writes in a March 4 commentary. He describes as ``Core Craziness'' the Fed's focus on so-called ``core'' inflation, minus food and energy.
Ryding, writing with colleagues Conrad DeQuadros and Meghna Mittal, takes particular issue with comments made by Governor Frederic S. Mishkin yesterday concerning the recent rise in one indicator of inflation expectations, the five-year, five-year forward implied inflation breakeven.
Speaking before the National Association for Business Economics yesterday in Arlington, Virginia, Mishkin said: ``Does this rise in forward inflation compensation indicate that long-run inflation expectations have risen by a similar amount? My best guess is that much of the rise in inflation compensation reflects other factors.''
Ryding disagrees.
The chart of the day shows the five-year, five-year forward breakeven inflation rate as constructed by economists Refet S. Gurkaynak, Brian Sack and Jonathan H. Wright. The series shows the difference between nominal and inflation-indexed yields of the five-year forward rate, five-years from now. Note the persistent rise in inflation expectations, and the abrupt surge beginning early this year.
`Troubling' Indicator
``In dismissing what is perceived as an important and potentially troubling inflation indicator, the Fed could lose the bank end of the treasury yield curve and actually push the long-term yields higher -- thus raising mortgage rates,'' writes Ryding.
In his speech, Mishkin said he expects ``inflation pressures to wane over the next few years, as product and labor markets soften and the rise in food and energy prices abates.'' He forecasts core inflation will ``move back to around 2 percent'' from the current 2.3 percent.
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no frigging way if the dollar keeps falling.
"core inflation"... what bullshit. these idiots ever heard of a rolling average to smooth volatile data?
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