31 July 2023
Eurointelligence’s Wolfgang Münchau has criticized the ECB’s forecasting model, stating it’s biased towards its inflation target and increases the risk of policy errors. Analyst Jim Bianco suggests a possible inflation rebound, arguing that inflation expectations, a key component in central bank models, are irrelevant to most of the Consumer Price Index. Despite this criticism, the Fed continues to adhere to its belief in inflation expectations. The inflationary pressure could be further exacerbated by policies such as Bidenomics, electric vehicle mandates, and wage increases without corresponding productivity gains. These wage hikes, without productivity growth, are stoking inflation. Controlling this inflation may necessitate an economic or stock market crash.