I noticed this chart in David Beckworth’s blog. Here’s what I see. On June 16, I warned of the danger of deflation. The expected inflation rate immediately began to fall, and it fell by a total of about 50 basis points over the next two-and-a-half months. Then on September 1 (with the expected inflation rate near its low), I urged the Fed to take quick action as bond yields were getting dangerously low, leaving increasingly little margin for the potential effectiveness of monetary policy. The Fed then began hinting at policy changes (partly realized in the QE2 announcement), largely as a result of which the expected inflation rate has since risen by about 40 basis points.
OK, I can see I’m going to have to start writing some more blog posts, so you all will know what to do next. (By the way, Mr. Bernanke, I second what David Beckworth said in the post where the chart appeared.)
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A –> B –> C, Does A imply C?
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