"If you thought at the start of this year that the Fed was behind the curve, and that it needed, through Fed-Funds rate increases and shifts in forward guidance, to do things with effects on long-term real interest rates that would be the equivalent of a 5%-point increase in the Fed Funds rate,"

At the START of the year I was pretty sanguine. They had started tightening in November rather than September but the 10 year (CPI) TIPS was only a bit above 2.3% (my guess at the equivalence to 2% CPE). This still looked like the Fed managing a bit of surprise COVID/supply chain shock. What I mainly wanted them to do was reiterate their average inflation target.

I only began to get worried in March when the 10 year TIPS rose to around 3%. I'm still relatively confident that the can get inflation back down without a real recession, but I really DO wish that they had started a couple of months sooner.

In principle I never have opinions about which instrument the Fed should move by how much. THAT is what it has a staff for.

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hey I am not being a smart ass- I am really that bad at math.. but isnt this a 12 times normal gearing not 9? I took 3/.025 =12.. I really am that bad at this stuff.. Help?

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Apr 20, 2022·edited Apr 20, 2022

I was curious about this 5 x 5 claim, so I went over to the Cleveland Fed to check their estimates of expected inflation, term risk premium, and inflation risk premium. The results were inconclusive; all three measures show sudden recent upticks. The expected inflation uptick looks the largest, but I wouldn't call it "the very top of what has become the normal range" unless that means post 2008.


The term structure of expected inflation was, uh, unexpected? A very sharp decline from 3.4% first year to 1 x 1 forward of 1.8%, then rising again to 2% and very gradually higher.

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Spade and hat: He’d just come back from harrowing hell, and He figured this place could use some sprucing up, too. Those tomb guards are so untidy!

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The anti-privatization argument was always implicit in James Q. Wilson's Bureaucracy. The book argued that public-sector institutions fail when tasked with conflicting missions, but succeed when their missions are unitary or complementary. There is nothing inherently inferior about public-sector efficiency. (The same is true for private-sector institutions, although it is muted a bit because profit-seeking is kind of a unitary mission.)

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