The four central bank episodes you map are the right framework for reading this week's data. What consistent allocators have learned from those cycles is that the timing error, not the direction error, is what causes the most damage. Volcker was right but early enough to be brutal. Trichet was wrong about both direction and timing simultaneously. The 1990 Greenspan episode worked because the look-through was short enough that expectations never had time to drift.
The PPI Stage 1 intermediate demand print is the number that makes the 1990 analogy most fragile. A 3.2% monthly jump in raw input costs at the start of the supply chain is not a consumer inflation story yet — but it is a two-quarter warning. Half of tactical allocators are underweight government bonds precisely because the pipeline data keeps refreshing the inflation argument before the consumer data has time to cool. The narrow inflation story is currently intact. The question is the shelf life.
The ECB and the Fed just picked opposite sides of the 2008 argument. History already graded that exam once.
The four central bank episodes you map are the right framework for reading this week's data. What consistent allocators have learned from those cycles is that the timing error, not the direction error, is what causes the most damage. Volcker was right but early enough to be brutal. Trichet was wrong about both direction and timing simultaneously. The 1990 Greenspan episode worked because the look-through was short enough that expectations never had time to drift.
The PPI Stage 1 intermediate demand print is the number that makes the 1990 analogy most fragile. A 3.2% monthly jump in raw input costs at the start of the supply chain is not a consumer inflation story yet — but it is a two-quarter warning. Half of tactical allocators are underweight government bonds precisely because the pipeline data keeps refreshing the inflation argument before the consumer data has time to cool. The narrow inflation story is currently intact. The question is the shelf life.
The ECB and the Fed just picked opposite sides of the 2008 argument. History already graded that exam once.
Hopefully Warsh and the rest of the board understand this and aren’t swayed by political influence…