& BRIEFLY NOTED: For 2021-12-22 We: As I have said, I have a very good—nearly Turing-class—Larry Summers mental emulation model running on my wet layer. It is, in fact, so good that sometimes I wonder: Has it not achieved sentience on its own? Has it not taken me over, and turned the rest of me into its meat-puppet? But, as I have also said, I simply cannot track how Larry got to his conclusion that, right now, it is effectively 1976: that rather than focusing on achieving rapid and complete recovery and leaving problems of containing inflation expectations to the future, the Federal Reserve needs to focus RIGHT NOW on controlling inflation and IMMEDIATELY scotch expectations of an inflationary spiral, lest it get itself into a situation like 1979 three years down the road. David Glasner agrees with my failure-to-track...
I am aware that American inflation is somewhat sui generis at the moment, but Canadian interest rates, inflation rates, and central bank actions do tend to track those of our large neighour to the south.
The Bank of Canada targets CPI inflation. The point target is 2% but the target control range is 1%-3%. Its preferred inflation indicators are trimmed CPI, median CPI, and "common" CPI (i.e. the inflation rate of the factor in a 1-factor model.) This page explains the BoC's targets and also has a useful historical graph of the four inflation measures: https://www.bankofcanada.ca/rates/indicators/key-variables/key-inflation-indicators-and-the-target-range/.
Examining the graph, you can see that November CPI came in at ~4.7%, trimmed at 3.4%, median at 2.8%, and common at 2%. I would note that:
1) 2 of 3 of the BoC's indicators are within their target control range.
2) The variance of CPI is in fact much greater than the key indicators.
3) Trimmed CPI, which is an average, is higher than the median.
4) The common factor CPI is lowest of all.
The Bank really only has one policy instrument to change inflation, interest rates. (Canadian banks have no reserve requirements.) One-and-a-half if you want to count term-structure operations. Since less than half of the headline CPI can be explained by a single factor, that suggests that it will be relatively insensitive to changes in the policy instrument - they'll have to change a lot to move inflation a little. All of this argues for caution on the part of the bank, in my view.
The Joe Consaon piece addresses something that I have wondered about. Why are Republicans engaged in what could be called an autogenocide of their favored demographics. At this point the future of American democracy may depend on COVID killing more Republican true believers than the number of votes Republican legislatures can suppress among Democratic favoring demographics.
I am aware that American inflation is somewhat sui generis at the moment, but Canadian interest rates, inflation rates, and central bank actions do tend to track those of our large neighour to the south.
The Bank of Canada targets CPI inflation. The point target is 2% but the target control range is 1%-3%. Its preferred inflation indicators are trimmed CPI, median CPI, and "common" CPI (i.e. the inflation rate of the factor in a 1-factor model.) This page explains the BoC's targets and also has a useful historical graph of the four inflation measures: https://www.bankofcanada.ca/rates/indicators/key-variables/key-inflation-indicators-and-the-target-range/.
Examining the graph, you can see that November CPI came in at ~4.7%, trimmed at 3.4%, median at 2.8%, and common at 2%. I would note that:
1) 2 of 3 of the BoC's indicators are within their target control range.
2) The variance of CPI is in fact much greater than the key indicators.
3) Trimmed CPI, which is an average, is higher than the median.
4) The common factor CPI is lowest of all.
The Bank really only has one policy instrument to change inflation, interest rates. (Canadian banks have no reserve requirements.) One-and-a-half if you want to count term-structure operations. Since less than half of the headline CPI can be explained by a single factor, that suggests that it will be relatively insensitive to changes in the policy instrument - they'll have to change a lot to move inflation a little. All of this argues for caution on the part of the bank, in my view.
The Joe Consaon piece addresses something that I have wondered about. Why are Republicans engaged in what could be called an autogenocide of their favored demographics. At this point the future of American democracy may depend on COVID killing more Republican true believers than the number of votes Republican legislatures can suppress among Democratic favoring demographics.