We are not yet equipped for miracles. This they should recognize i central bankers desperately trying to revive inflation. A much more difficult mission than that of the doctors and nurses who treat Covid-19 patients who ended up in the semi-Dantesque circle of intensive care and lung ventilators.
They know very well that they exist powerful asymmetries at work in economic systems. Depending on whether the system is running at a good pace and is close to full employment. Or that he's in trouble. As far as monetary policy and its effectiveness on prices are concerned, these asymmetries are best summed up in the old adage that compares central bank action to a string: when you pull it works very well, very bad when you push it.
It seems that even researchers at the most advanced frontier of economic studies have recently become aware of these asymmetries: hot water is always a beautiful discovery, which has often earned the Nobel prize. And there too FED which has launched the new strategy: to let the rope slack until there are evident and prolonged tensions on prices. Or until you see inflation in the whites of the eyes.
In its own way ECB he's been doing it for a while, when he says that to raise rates it is necessary that «inflation moves towards the goal in a sustainable way, the line with his (of the ECB, ndt) I commit". This was recently reiterated by David Lane, chief economist and member of the Council of the ECB.
The fact is that the road for central banks to achieve a little more inflation is paved with good intentions. But, precisely because it is now their turn to push on the rope, they continue to implore the governments at every opportunity to launch it a more expansionary fiscal policy. Because this can really raise demand and therefore restart the growth process which, in the long run, would lead to greater price dynamics. Perhaps.
Looking at the qualitative and quantitative data, something starts to move in the price lists. But only in the USA. Where both the increase in consumer prices (whichever measure you want to use) and the responses to the PMI survey point to widespread increases in manufacturing and services prices. And, if Biden wins and has a friendly majority in the Senate as well, then the budget boost would be powerful enough to stir up wage increases and inflation.
In 'Eurozone and in 'Far AsiaInstead, discounts dominate, due to lack of demand, strong competition, large spare capacity, productivity increases thanks to new technologies. They are, that is, opening up two new oceans, in addition to the existing natural ones, which make America economical further. It will be interesting to examine its evolution and measure its possible enlargement.
On the other hand, the cost pressures they normalized. The quotations of raw material have stabilized at levels similar to the pre-pandemic ones. Only the Petroleum it is over a third shorter, and weighs a lot.
Il cost of labor it's going up, but not because unit wages go up. Indeed, many people have accepted temporary reductions in wages in order to get back to work and not stay at home. Rather because, with the resumption of activities, this cost has returned to being in the balance sheets of companies, while previously it was borne by the State through social safety nets.
On the other hand there is a huge army of unemployed or underemployed workers everywhere. A reality that is better seen from the employment rates than from the unemployment rates, because many people do not seek a job for fear of being infected and because they are discouraged in their search. Seeing better does not mean seeing clearly: in addition to people who have left the labor market, there are those forced to accept part-time jobs because there is no full-time job. With all this labor supply pressing on demand, it will be very difficult to observe wage increases in the coming quarters, indeed years. And if the cost of labor does not increase, the first mobile engine of inflationary processes is missing, with good luck for the central bankers, who are doing everything possible and even more, but who, being human too, are not endowed with the touch neither magical nor miraculous.
