The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Friday, September 16, 2011

UK BoE Inflation Expectations Surge to +4.2%

So the last redoubt of inflation doves is inflation expectations. In Australia, expectations crept up yesterday from +2.7% to +2.8%, but are down from recent highs. Much more worrying developments exist overseas. Check out this amazing chart of the Bank of England GfK Inflation Expectations Survey for inflation in the next 12 months. It is quite extraordinary. UBS's Matt Johnson and I have had a little debate about US and UK inflation. Matt suggests it is not a problem because there is so much labour market slack, and little evidence of it bleeding into expectations, that the likelihood of wage-price spirals is low. He may be right. This chart shows that UK inflation expectations are spiralling up strongly. We will have to wait and see if this influences medium-term wage claims. Either way, the hawks within the BoE are likely shitting bricks.