I’ve been looking at real long term interest rates as proxied by nominal rates minus expected inflation. The problem of course is finding measures of expected inflation. Subtracting off the ex post rate (appropriate under the rational expectations hypothesis) can lead to misleading inferences — and is not practicable for current measures of long term rates. Using ten year constant maturity rates and the Society of Professional Forecasters 10 year horizon CPI inflation rates yields the following picture.
What will the Fed do next?
Probably nothing.
WIN buttons and Arthur Burns
I normally find myself agreeing with Dave Altig’s high-quality analysis over at Macroblog. But I’m afraid I have to leave Dave all alone in his latest quixotic mission to defend Arthur Burns (Chair of the Federal Reserve during the great inflationary episode from 1970 to 1978) and Gerald Ford’s old WIN buttons.
Is Decoupling Possible?
The dream rebalancing scenario, in which adjustment of the world’s imbalances occurs without fiscal responsibility returning to America, relies upon “decoupling”.
Encouraging numbers for new home sales
The Census Bureau today reported that new home sales were 3.4% higher in November relative to October, on a seasonally adjusted basis.
Janet Yellen on Inequality in America
A survey of trends in income inequality, and some thoughts on what policy responses might be appropriate.
Blood, oil, and ideology
Mark Thoma and
Two Angry
Bears
call attention to this post
from Christopher Hayes.
Surge or no surge? minimal “burn rates” for operations in Iraq
Where are expenditure rates now? Where might they go?
The term premium and reduced volatility
I earlier discussed the role that foreign government purchases of U.S. Treasury securities may have played in reducing long-term bond yields. A study by Fed researchers Glenn Rudebusch, Eric Swanson, and
Tao Wu that is soon to appear in
Monetary and Economic Studies explores an alternative explanation based on reduced volatility of underlying macroeconomic and financial fundamentals.
The RMB: Where’s it been and where’s it going?
Faster appreciation against the dollar. And apparently against a broad basket of currencies.