Sumner is feeling good

trillion here and a trillion there . . by Scott Sumner

...PPS. A few days ago Andy Harless left a comment pointing out that when interest rates are falling, higher stock prices don’t necessarily imply higher NGDP expectations. BC left a comment with data suggesting that NGDP growth expectations have probably risen as a result of recent events:

I do have some inflation swaps data. Inflation swaps are usually a little higher than TIPS breakevens due to some differences in financing rates between TIPS and nominal treasuries in the repo market.

The most pronounced change in inflation swap rates was in 1-2 yr forward inflation (expected inflation between Sep 2014 and Sep 2015). It rose from 1.80% to 1.95% between Friday 9/13 and Monday 9/16, coincident with the Summers withdrawal. As of Wednesday, it had risen to 2.18% in response to the Fed surprise non-tapering. So, overall in increase of 0.38% between Friday and Wednesday. Over that period, 0-1 yr inflation has not changed much (increased from 1.59% to 1.63%), nor has 2-5 yr inflation (decreased from 2.54% to 2.49%). 5-10 yr inflation has increased from 2.70% to 2.93%.

And RGDP expectations? That’s why we need a . . . that’s right, an NGDP FUTURES MARKET!!!

 From yesterday's news about the Fed's non taper.

Instant reaction: All hail Ben Bernanke! by Scott Sumner