martes, 17 de agosto de 2010

¿signos de estanflación en Inglaterra?

Así lo publica el NY Times:

Continued Inflation Is Called Temporary
By JULIA WERDIGIER
Published: August 17, 2010

LONDON — Consumer-price inflation in Britain remained above the government’s limit in July, according to data released on Tuesday, forcing the head of the Bank of England to send his third letter this year to the Treasury to explain why inflation missed the target.

Inflation in Britain slowed slightly last month, to an annual rate of 3.1 percent from 3.2 percent in June, the Office for National Statistics said. But the rate was still more than one percentage point above the government’s 2 percent target.

In his letter, Mervyn A. King, governor of the Bank of England, said that the central bank’s monetary policy committee was surprised by the recent strength of inflation. But he also reiterated that such inflation levels were expected to be temporary.

Factors like higher oil prices would “prove to have a temporary impact on inflation, and are masking the downward pressure on inflation” from slow economic growth, Mr. King wrote in the letter.

Some economists agreed with that assessment. “Inflation is likely to hover close to 3 percent for the next few months, with the Russian wheat crisis putting upward pressure on food prices,” Andrew Goodwin, an economist at Ernst & Young in London, said. “But these are all temporary factors, and underlying price pressures remain weak.”

Policy makers continue to disagree about the cause of a persistently high rate of recent consumer price increases even during the recession. Mr. King had attributed it to changes to the sales tax and the delayed effects of higher oil prices and a lower pound, which made imports more expensive. Others said consumer demand had not dropped as much as anticipated, given that employment has been somewhat stronger than expected.

Whatever the causes, British inflation figures remain above those in the 16 countries that use the euro, where higher energy prices drove euro zone inflation to an annual rate of 1.7 percent in July. That was the highest level in 20 months, but still within the range considered acceptable by the European Central Bank.

Mr. King reiterated that he expected Britain’s inflation rate to remain above the 2 percent target until the end of 2011 before falling below it. Inflation above the government target makes it more challenging for the Bank of England to set interest rates, which remain at a record low of 0.5 percent. But many economists expect the central bank to keep the rates unchanged for a while so as not to jeopardize the fragile economic recovery.

House prices across Britain had been rising until recently, helped by low mortgage rates and foreign buyers lured by an attractive exchange rate. But the market is now showing signs of weakness as more people put their homes up for sale to benefit from the higher prices.

At the same time, many households and businesses are still heavily dependent on credit, and the government is preparing for billions of pounds of spending cuts. Raising rates now would squeeze consumers at a time when the economic recovery is already weakened, some economists said.

“Assuming the government tightens fiscal policy as planned, we expect the bank rate to remain at 0.5 percent for several years,” Mr. Goodwin said.
A version of this article appeared in print on August 18, 2010, on page B2 of the New York edition.

sábado, 14 de agosto de 2010

Publicado el 12 de agosto en The New York Times

Paralysis at the Fed

Ten years ago, one of America’s leading economists delivered a stinging critique of the Bank of Japan, Japan’s equivalent of the Federal Reserve, titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” With only a few changes in wording, the critique applies to the Fed today.

Fred R. Conrad/The New York Times

Paul Krugman

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At the time, the Bank of Japan faced a situation broadly similar to that facing the Fed now. The economy was deeply depressed and showed few signs of improvement, and one might have expected the bank to take forceful action. But short-term interest rates — the usual tool of monetary policy — were near zero and could go no lower. And the Bank of Japan used that fact as an excuse to do no more.

That was malfeasance, declared the eminent U.S. economist: “Far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism.” He rebuked officials hiding “behind minor institutional or technical difficulties in order to avoid taking action.”

Who was that tough-talking economist? Ben Bernanke, now the chairman of the Federal Reserve. So why is the Bernanke Fed being just as passive now as the Bank of Japan was a decade ago?

Now, America’s current economic troubles aren’t exactly identical to those of Japan in 1999-2000: Japan was experiencing outright deflation, while we aren’t — yet. But inflation is well below the Fed’s target of around 2 percent, and it is continuing to slide. And Americans face a level of unemployment, and sheer human misery, far worse than anything Japan went through.

Yet the Fed is doing almost nothing to confront these troubles.

What could the Fed be doing? Back when, Mr. Bernanke suggested, among other things, that the Bank of Japan could get traction by buying large quantities of “nonstandard” assets — that is, assets other than the short-term government debt central banks normally hold. The Fed actually put that idea into practice during the most acute phase of the financial crisis, acquiring, in particular, large amounts of mortgage-backed securities. However, it stopped those purchases in March.

Since then, the economic news has grown steadily worse. And earlier this week, the Fed changed course — but barely. It now says that it will reinvest the proceeds from maturing securities in long-term government bonds. That’s a trivial change, basically the least the Fed could get away with without facing a firestorm of criticism — and far short of the major asset-purchase program the Fed should be undertaking.

Back in 2000, Mr. Bernanke also suggested that the Bank of Japan could move expectations by making announcements about its future policies. In particular, he argued that it could make private-sector borrowing more attractive by announcing that it would keep interest rates low until deflation had given way to 3 percent or 4 percent inflation — an idea originally suggested by yours truly. Since we are, if anything, in worse shape now than Japan was in 2000, an inflation target of at least 3 percent would very much be in America’s interest. But as chairman of the Fed, Mr. Bernanke has explicitly rejected any such move.

What’s going on here? Has Mr. Bernanke been intellectually assimilated by the Fed Borg? I prefer to believe that he’s being political, unwilling to engage in open confrontation with other Fed officials — especially those regional Fed presidents who fear inflation, even with deflation the clear and present danger, and are evidently unmoved by the plight of the unemployed.

And in fairness to Mr. Bernanke, discord among senior officials also makes it difficult for policy to change expectations: it would be hard to credibly commit to higher inflation if this commitment were constantly being undercut by speeches out of the Richmond or Dallas Feds. In fact, I’d argue that loose talk by some Fed officials is already having a negative economic impact. But while Mr. Bernanke doesn’t have the authority to stop that loose talk, he could make it clear that it doesn’t represent overall Fed policy.

Last, but not least, policy is suffering from an act of neglect by President Obama, who waited until his 16th month in office before offering a full slate of nominees to fill vacancies on the Federal Reserve Board. If he had filled those slots quickly — his nominees still aren’t in place — the Fed might be less passive.

But whatever the reasons, the fact is that the Fed — which is required by statute to promote “maximum employment” — isn’t doing its job. Instead, like the rest of Washington, it’s inventing reasons to dither in the face of mass unemployment. And while the Fed sits there in its self-inflicted paralysis, millions of Americans are losing their jobs, their homes and their hopes for the future.

David Brooks is off today.