Tuesday, July 1, 2008

Again on inflation expectations (os)

A few post earlier, I touched on the issue wether inflation expectations have been risen or not during the last months. Because of the not so academic "analysis" (the "Bild Zeitung" is not so much a reviewed Journal) I owed you a more academic one and I found it. The University of Michigan has a interesting data set provided by the St. Louis Fed, which indicate a significant rise in inflation expectations during the last months in the United States. There are definitely different concerns with the measurement, the concept and the role of the rising oil price these days but despite this i would claim: if central banks - at least in my view, do have the task to control more than before inflation expectation than actual inflation, this could be the beginning in losing a lot of credibility in the next years. Followed by high costs due to fight inflation and especially inflation expectations.