Wednesday, April 6, 2011

A few observations on inflation

I won't bore you with the usual details of Monday's inflation figures; you can read them in any analyst report. But here are four interesting observations on Monday's release:

First is the growing wedge between CPI and PPI  inflation:
As you can see, the two series were moving in tandem until of late.

Second, the link between oil prices and PPI has broken of late as well:
Third, exchange rate pass-through has been significantly lower than usual:
I would naturally expect the pass-through to be lower when there is excess capacity in the economy, but I just can't figure out how this is the case with signs of overheating sprouting like mushrooms...

And last but definitely not the least,  one of zillions of items the CBT collects prices on is bank fees, and that increased by 9% (over the month) in March. In case you were wondering how the banks were responding to the CBT's reserve requirement ratio hikes....

3 comments:

Anonymous said...

Maybe it is the assumptions that make these observations interesting. I think you should be questioning your inferences on CPI-PPI relationship, passthrough effects of oil and exchange rates and finally the overheating.

Emre Deliveli said...

Great point, thanks... Actually, this was supposed to be my last sentence, but got interrupted and forgot to add it in:)... But I am still not convinced the assumptions are dead-wrong...

Blogger said...

eToro is the best forex trading platform for new and established traders.