So, 12 minutes until C-hour, as in CPI. And you know that all the headlines will be about headline and core inflation over the past year — even though everyone knows these are poor indicators of the current state of inflation 1/
Things we know: shelter costs are a hugely lagging indicator, reflecting a surge in market rents that ended many months ago 2/
That's why HICP, which doesn't include implicit rents on owner-occupied housing. looks so much better than CPI 3/
But also, used car prices, which have been fluctuating wildly, shouldn't be in the core. 6-month annualized rates of change (annual changes lag too far behind events) 4/
I'm trying to stay consistent and use 6-month changes in core CPI ex shelter and used cars. My guess, with 2 minutes to go, is that it will be showing a rate around 3. Also interested in the trend — rising or falling makes a difference 5/
And that's a very good number — well under 3, and falling. Tell me how inflation is still a big problem? 6/




It's nice to see economists squabbling over who gets credit for declining inflation, as opposed to who gets blame for rising inflation. As I see it, there are two and a half possible stories 1/
The half story is that this is another head fake — maybe something about the seasonal adjustment factors or something, and the numbers will be revised to make things look less rosy. Probably not given all the private surveys, but history makes me nervous 2/
Assuming the news is real, one possibility is that a lot of inflation was in fact the temporary result of pandemic-related disruption, which is now fading away 3/
The other is that when the economy is at full employment, the Phillips curve is very steep, so a cooling off of demand sharply reduces inflation without a noticeable rise in unemployment 4/
At a guess, there's some truth to both stories. Fwiw I don't think the Fed was wrong to raise rates; it may even need to keep them high given the economy's surprising resilience. But there's now a very strong case for pausing and looking around 5/


A lot of people saying that disinflation was caused by Fed rate hikes. And even though I supported those hikes — I don't think there was any alternative — I'm puzzled by these claims. How is this supposed to have worked? 1/
The textbook story is that it works like this:
Higher rates => economic slack => disinflation
But where's the rise in economic slack? 2/
Do people have a theory of immaculate transmission of monetary policy to prices, without any real-economy weakness along the way? If so, what is that theory? 3/
I guess one possibility is that there has been an increase in slack, but that it's small enough to be invisible given the fuzziness of economic data — and that the Phillips curve is so steep right now that even an invisible rise in slack can cause major disinflation 4/
Another possibility is that we were experiencing Long Transitory — disruptions from the pandemic were still feeding inflation well into 2022, and are only now fading away. That's what Matt Klein seems to be saying 5/
Room for argument here. But simple "It was the Fed wot did it" takes look a lot less justified than many are claiming 6/
 金利上昇 ⇒ 経済のスラック ⇒ ディスインフレ

実体経済の弱体化を伴わない、金融政策から物価への無垢な伝播の理論があるというのか? そうだとすると、それはどんな理論なのだ?



In today's newsletter I suggested two reasons inflation may have come down so painlessly — the end of Long Transitory, ie extended supply disruptions from Covid, and a near-vertical Phillips curve in a hot economy 1/
Many of the more coherent answers to this question from earlier today fall along similar lines 2/
I guess I should clarify that I am NOT asserting that the Fed was wrong to raise rates. If it hadn't, we might not have achieved the disinflation we've seen. But that isn't the same as the simple story that rate hikes drove disinflation 3/



Most of the responses I've seen to this come down either to Long Transitory or nonlinear Phillips curve. That is, we're finally resolving Covid disruptions and/or we're in a place where reducing demand hits inflation but not output 1/
Basically where I am too. But suggests that simple "the Fed did it" takes are wrong. And saying that we would have higher inflation if the Fed hadn't hiked is probably true — especially with nonlinear Phillips curve — but that's an answer to a different question 2/
What about expectations? The thing is, expectations seem to have stayed pretty anchored throughout, and not many people think they were a major factor in high inflation last year 3/
Also, *whose* expectations? If you look, say, at the NFIB survey, many fewer respondents are planning to raise prices than a year ago. Do you think small businesses are watching Powell press conferences, grading his credibility, and changing their pricing plans? 4/
Anyway, it's great that we're arguing about who gets credit for success rather than who takes blame for failure 5/

予想についてはどうだろうか? 重要なのは、予想は終始かなりの程度固定されたままのように見える、ということだ。それに、昨年の高インフレにおいて予想が大きな要因だったと考える人は多くない。


Some thoughts on real wages. They're finally rising, but are only roughly where they were on the eve of the pandemic (ignore the wild compositional effects in 2020). This still leaves them below trend 1/
So what hit real wages? Not inflation per se, which should be zero sum. Instead, there were rises in the *relative* prices of food, energy and shelter, which the back of my envelope says depressed real wages by 2.2% relative to trend 2/
The thing is, none of these relative price hikes were caused by US policy. They're largely about the Ukraine War and remote work. Hard to blame Bidenomics for either of these 3/

では何が実質賃金に打撃を与えたのか? ゼロサムになるはずなので、インフレそのものではない。食料、エネルギー、住宅の「相対」価格の上昇があったのだ。簡単な計算によれば、それによって実質賃金はトレンドよりも2.2%抑制された。