David Beckworth:
The figure below shows the year-on-year growth rate of treasuries held by the Fed plotted against the core PCE inflation rate. It appears that Fed's purchases of treasuries leads core inflation by about six to nine months.
Pretty interesting, not least of all because the two humps on the blue line appear to be sized in proportion to the two humps on the black line.
For reasons unrelated to Beckworth's topic, that wave pattern is something I was looking for. On the graph below I repeat Beckworth's black line, and add a close-up view of the Federal Funds rate since January 2009:
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| Graph #2 |
UPDATE 4 December, 4:49 AM
I inverted the interest rate from Graph #2:
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| Graph #3: Pretty Much the Same Pattern |
8 comments:
Why does my attempt to duplicate Beckworth's graph end up so different from his?
I am seriously baffled.
The missing link.
http://research.stlouisfed.org/fred2/graph/?g=pBy
Start graph 3 only 1 year sooner, and the relationship totally breaks down.
http://research.stlouisfed.org/fred2/graph/?g=pBz
Hey Jazz. Look at the text in the left blue border of the pBy graph. Somehow, it takes percent change of percent change. Maybe that's why the blue humps are so much thinner on your graph than on Beckworth's.
RE the "one year sooner" change in Graph #3: Yeah. We think alike. I also want to know what happens to the two lines, in the time BEFORE the "interest on reserves" years.
Took me a minute to figure out why the red line goes flat in your pBz graph. A year before 2009, the FedFunds rate was up around 4 or 5 percent. Since 2009 it is down around zero. And really, that is exactly what your graph shows.
I didn't realize how low the low is, until looking at your graph.
Oh. I see.
http://research.stlouisfed.org/fred2/graph/?g=pCI
This is a lot closer.
Now - how in the sam hill did I get FRED to take a 2nd derivative?
[I will say i was very sleepy when I was doing that this afternoon]
I wondered why DB was looking at such a short term sequence, but I see the context is Williamson's QE --> deflation idea.
I think Beckworth blew it up pretty well.
Cheers!
JzB
It looks like when you include food and energy in personal expenditures the effects of the Fed buying Treasuries disappears.
http://research.stlouisfed.org/fred2/graph/?g=pDR
Is that Beckworth cherry-picking again???
Good one, Jim.
Well, we all cherry pick when we think we can get away with it...
When you look at the graph for overall personal spending, it appears to have not follow the pattern of QE
treasury purchases.
The increase in personal spending holds at around a steady 4% pace from
2010 onward. This implies that the peaks in the PCEPILFE graph are really troughs in the amount spent on food and energy. If you turn that PCEPILFE graph upside down it reveals the pattern of change in spending on food and energy and it makes it look like the Fed was reacting (delayed) to that pattern.
http://research.stlouisfed.org/fred2/graph/?g=pFI
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