►Jump in China inflation paves way for more tightening
Aileen Wang and Simon Rabinovitch/Reuters/Nov 11
Chinese inflation sped to a 25-month high in October and bank lending blew past expectations, highlighting the challenge faced by Beijing as it battles to keep a lid on price pressures.
The data left little doubt about why the central bank raised reserve requirements this week and pointed to further tightening steps, from rate rises to yuan appreciation, in coming months.
►Mervyn King: high inflation will not force rate rise
Larry Elliott and Nicholas Watt/Guardian/Nov 10
The Bank of England predicted today that inflation in Britain would remain above its target for the whole of next year as the rise in VAT in January and dearer imports affect the cost of living.
Mervyn King, the Bank’s governor, admitted that inflation continued to exceed Threadneedle Street’s expectations, but gave no hint that the nine-strong monetary policy committee was about to raise borrowing costs in response.
►Dollar pares gains after hitting 1-month high
Nick Godt and William L. Watts/MarketWatch/Nov 10
The dollar rose Wednesday to its best level against the euro since early October after a combination of better data in the U.S., a weak Portuguese bond auction and rising rates in China fueled interest in the U.S. currency.
►World Bank chief nixes return to gold standard
Chris Isidore/CNNMoney/Nov 10
A return to the gold standard by major economies is not practical, World Bank President Robert Zoellick said Wednesday, just two days after an opinion piece he wrote stirred talk of the need to do just that.
James Hamilton/Econobrowser/Nov 10
I feel that there is a pretty strong case for interpreting the recent surge in commodity prices as a monetary phenomenon. Now that we know there’s a response when the Fed pushes the QE pedal, the question is how far to go.
►A Way, Day by Day, of Gauging Prices
Justin Lahart/Wall Street Journal/Nov 10
Economists will dissect next Wednesday’s government report on consumer prices for any sign inflation is heating up—or cooling. But a pair of academics in Boston already has data they think show where prices went.
►Temporarily Unstable Government Debt and Inflation
Troy Davig and Eric M. Leeper/Working Paper/Oct 18
As countries enter an era of fiscal stress, policymakers will confront the implications of that stress, and its associated uncertainty, for inflation and the ability of monetary policy to control inflation and affect the economy in the usual ways. Debt can assume an explosive trajectory in periods when taxes are unable to move higher for political reasons and central banks continue to fight inflation aggressively. Explosive debt dynamics push countries toward their fiscal limits and can have powerful effects on inflation that depend on expectations of future monetary and fiscal policies. In most countries, political institutions do not anchor fiscal expectations on policies that would prevent inflation.
►GOP Victory May End Government Economic Intervention
Mark Thoma/Fiscal Times/Nov 9
We will be much less likely to use fiscal policy in the future, particularly government spending – much to the detriment of any future generations caught in a large downturn. As for the Fed, it still has considerable independence and a job to do in managing the economy, and it will continue to do that job. But the Fed will be far less willing to take bold steps to try to alter the direction of the economy, and far less likely to get the support from Congress it needs for another bailout to prevent a financial meltdown. And if the degree of independence the Fed currently enjoys is reduced through Congressional action, a very real possibility with people like Texas Rep. Ron Paul , a libertarian, as potential members of key oversight committees, even the routine management of the economy by the Fed could be affected.
►Deficit panel targets Social Security and taxes
Donna Smith and Jeff Mason/Reuters/Nov 10
Leaders of a presidential commission proposed raising taxes and the retirement age among bold ideas on Wednesday for slashing the U.S. budget deficit, but faced a difficult task in winning the support of Congress.