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15.10.28 blog RW1

The real data – the Phillips curve is alive and well

One of the first rules of economics is that the equilibrium market price is generated by relative supply and demand. Limited supply or excess demand should result in an increase in price. One of the questions that has arisen in the post financial crisis world is why have wages not increased despite unemployment heading towards historically low levels? Given the improvement in data such as headl…

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What has the recent fall in oil prices got to do with inflation over the next three decades?

What has the recent fall in oil prices got to do with inflation over the next three decades? Plus robots, charity, Morrissey.

First of all thanks to Business Insider.  Every now and then we come into work to find hundreds of new Twitter followers have joined us overnight – this week it was thanks to BI listing us second in its round up of finance Tweeters.  It’s a great list and pretty much everyone on it is worth a follow – I’d also recommend following Business Insider’s European markets editor Mike Bird (@Birdyword)…

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M&G YouGov Inflation Expectations Survey – Q3 2015

One of the key objectives of modern monetary policy is to anchor inflation expectations, because managing inflation expectations is the first step to managing inflation.

The extent to which inflation expectations are anchored can have direct implications for the performance of inflation and the broader economy.

Where inflation expectations are not very well anchored, falling (or rising) inflati…

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MG_BV Blog_BL_Sep-15-1

UK inflation: are transient and volatile items masking an improving domestically generated inflation picture?

This morning CPI in the UK has fallen from 0.1% in July to 0% in August, both in year-over-year terms. Continuing deflationary trends observed in transport (largely petrol) and food (supermarket price wars), which have together taken 0.7% off CPI over the last year, were dragged back up to the zero bound by alcohol and tobacco (these always go up!), education and restaurants and hotels, with sm…

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What should the relationship be between index-linked bond yields and equity yields?

There ought to be a relationship between yields available on equities (earnings or dividend yields) and those on index-linked gilts and other inflation-linked bonds.  Ex-ante, and adjusted for risk, expected returns should be similar across asset classes.  In the case of equities and index-linked bonds, both asset classes give you exposure to “real” returns on both income and capital.  For inde…

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Inflation Surprises – what’s driving the current increases in market- and survey-based indicators of inflation expectations?

(blog originally posted on www.bruegel.org)

Euro area consumer price inflation, as measured by the HICP, continues to undershoot the ECB’s target of “close to, but below 2%”, currently at -0.1% in March. While it is still too early to tell if the ECB QE programme launched on March 9 will manage to bring back inflation towards the target in the medium term, a look at market- and survey-based inf…

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Explaining the collapse in global inflation rates – step forward China

We’ve been worried for years about the prospect of a sharp slowdown in China and the knock on implications for those countries and companies that have grown reliant on a strong China over the last decade, namely commodity exporters, some emerging markets, and particularly emerging market commodity exporters (eg see If China’s economy rebalances and growth slows, as it surely must, then who’s sc…

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Tweet inflation survey March 15

The M&G YouGov Inflation Expectations Survey – Q1 2015

Economic policy hawks love inflation expectation surveys. As do bond fund managers, who like to keep a close eye on inflation to ensure that fixed income returns aren’t being eroded away. Provided that inflation expectations are close to target, we tend to argue expectations are well anchored and thus central bankers can rest easy. However, the monetary policy actions undertaken by many central…

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2015-03 blog

Falling consumer and oil prices may not provide the boost to growth many are expecting

The spectre of deflation currently haunts central bankers around the world, though many of us would question whether the true effects of falling prices are being felt in the real economy and more importantly in consumers’ wallets.

According to the results of the M&G YouGov Inflation Expectations Survey over the past two years, European consumers often believe that inflation in one and five year…

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A rallying bond market means duration lengthens

Either longer dated index linked gilts are very vulnerable, or the UK economy is

If at the beginning of 2014 you had made a list of what you thought would be the best performing fixed income asset classes globally for the coming year, it’s very unlikely you’d have put UK index-linked gilts at the top. It’s probably even less likely that you’d have put Argentina’s (hard currency) bond market in second place, especially if you had been told that Argentina would default in 201…

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