Not swinging satellites around the sun

Tim Duy is in top form in his latest Fed Watch: Chewing on the data

So this is what is has come to:

A price index for personal consumption expenditures excluding food and energy rose 0.2% in April, meeting expectations. However, the unrounded number was 0.24968%, failing to calm inflation concerns.

This gem is from the Wall Street Journals first take at the April’s Personal Income and Outlays report.  We are all going to go crazy if data dependence really means that we need to start rounding to the fifth decimal place.  Considering the likelihood of revisions and measurement error, talking about inflation to the third decimal place is not particularly constructive; the fifth decimal place is downright silly.

I will put this as simply as I can - never, not once, in any discussion I ever had with a Federal Reserve official, did an official round beyond the second decimal place. Actually, I am not even confident I heard anyone round beyond the first decimal place. Let’s try to keep some perspective. This is monetary policy. We are not swinging satellites around the sun here.

Duy expects the Federal Reserve to soon “ take a breather from the rate hikes” in June, but cautions that:

..while I feel my resolve on that call strengthening again, hawkish sounding rhetoric from some Fed officials reminds us that nothing is a sure thing at this point, and a month of data is yet to come.

Continue to remember that a pause does not mean done; with the economy set to bounce around capacity, Fed Chairman Ben Bernanke will keep one foot hovering over the brake.

And the other foot on the accelerator?

Comments

[Laurent GUERBY]

While I agree that one decimal place is okay for yearly inflation (or most economics measures), monthly or quaterly should be reported with two or more decimal places, not because the measure is more accurate (it is obviously not) but because when you compound them you aren't too far from the yearly number, so at least you're giving coherent information.

Common sense is needed for satelittes too :).

[gfsgfh]

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