Tuesday, February 9, 2016

Central bankers make inspector Cluseau look smart

Japan's negative yield conundrum:
Negative yields on a (Japanese) ten year note...That does not bode well for expectations that Japan is getting inflation back to 2%. I wonder what the BOJ thought when it went to negative short rates, since lower rates seem to imply ongoing low inflation. Now- of course- if the short rate is negative and the yield curve steepens you have your cake and eat it too.  That's what the BOJ wants. But that is not happening.

Instead, like the Fed it is Ready! Shoot! Aim!!! Fed policy which is geared to keeping rate hikes in play will keep the dollar strong and that will keep the economy weak and inflation low- NOT at 2%... Ready! Shoot! Aim! In short it is no way to achieve your inflation objective.

What the heck do these central bankers think they are doing? Just anything that comes to their mind?  I have never before seen so much policy at cross purpose to the central banks' ostensible policy objective. Is the Fed really about normalcy? Do you put rates at normalcy when the economy is still wounded and no where near normal?  On what planet does that make sense?

Planet Pink Panther?

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