(Global Stagflation) - 'Spanish Inflation Soars to 10%..' - '..the root cause of the Fed’s policy errors and long record of failed forecasts..'

'Spanish inflation unexpectedly surged to a record, defying government efforts to rein it in and signaling intensifying price pressure as the European Central Bank gears up to raise interest rates for the first time in more than a decade.

The surprise 10% reading for June dashes hopes that inflation in the euro zone’s fourth-biggest economy had peaked and highlights how a squeeze on consumers, once forecast to be transitory, is instead intensifying. The rate is up from 8.5% in May and exceeded all 15 estimates in a Bloomberg survey of economists.

..

Inflation expectations among Spanish consumers increased this month, according to a separate release from the European Commission, which showed an overall decline for the euro area. Spain wasn’t alone in bucking the trend -- households on the region’s periphery including Greece, Portugal and Estonia also grew more worried.'

- Spanish Inflation Soars to 10% as ECB Gears Up for Hikes, June 29, 2022


'..By focusing on the Phillips Curve, Meltzer contended that the Fed overemphasizes information in very short monthly and quarterly data periods while giving insufficient information about persistent trends in money and credit, which are the very aggregates that the Fed supplies. In short, by relying on the Phillips Curve, the Fed avoids developing a strategic view of its role and the complex world in which it operates. Volcker explained publicly and to the Fed staff that the Phillips Curve was unreliable and not useful..'

'..Two considerations indicate the influence of the Phillips Curve should have ended long ago: (1) critical theoretical arguments from great monetary theorists, and (2) empirical evidence.

..

In a paper presented at the 2014 Federal Reserve Bank of Chicago conference, Alan Meltzer summarized the root cause of the Fed’s policy errors and long record of failed forecasts as follows: “The Fed’s error was to rely on less reliable models like the Phillips Curve ... that ignore or severely limit the role of money, credit, and relative prices.” By focusing on the Phillips Curve, Meltzer contended that the Fed overemphasizes information in very short monthly and quarterly data periods while giving insufficient information about persistent trends in money and credit, which are the very aggregates that the Fed supplies. In short, by relying on the Phillips Curve, the Fed avoids developing a strategic view of its role and the complex world in which it operates. Volcker explained publicly and to the Fed staff that the Phillips Curve was unreliable and not useful. Alan Greenspan was less outspoken, but he also rejected Phillips Curve forecasts as unreliable. After Greenspan left the Fed, the staff re-established the focus on the Phillips Curve, one of the central dogmas of Keynesian economics.'

- Dr. Lacy Hunt, Quarterly Review and Outlook First Quarter 2022, April 20, 2022



Context '..Almost universally, rates have been kept lower than the Taylor Rule had suggested..'

(Banking Reform) - 'Disaster is a strong but appropriate word that applies perfectly to the state of U.S. monetary policy..' - Dr. Hunt

(Global Stagflation) - 'German Inflation Hits Fresh Record .. jumped 8.7% from a year ago in May.' - 'Japan wholesale prices hit record 10%..'

Biggest Currency Rout Since 1997 Puts Asia Central Banks in Bind, June 29, 2022


(Global Stagflation) - '..the Fed continues to misjudge inflation..' - Markets and households lose faith that Fed can handle inflation

Fed Study Shows Phillips Curve Is Useless: Admitting the Obvious, August 29, 2017

Yet Another Fed Study Concludes Phillips Curve is Nonsense, January 15, 2019


(Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'