Be careful when using other people´s charts!

Brad DeLong writes January inflation expectations: The Evans Rule at work.:

Here’s the latest Cleveland Federal Reserve bank estimates of market inflation expectations…. [S]hort-term inflation expectations are way up. Market participants who are deciding right now what to do with money are pushed at the margin to avoid super-safe low-yield assets and to either make riskier (or less liquid) investments or to “invest” in the acquisition of durable goods. But over longer horizons, there’s no shift whatsoever. People don’t believe the Fed has lost control of the economy.

And copies this chart from the Cleveland Fed site:

Beware Charts_0

The higher short-term targets are consistent with longer-term expectations remaining “anchored” basically where the Fed wants them. Unconventional stimulus seems to work in shaping expectations, and doesn’t have a downside in terms of longer-term destabilization.

Brad´s story is built around the chart. Unfortunately, the chart is wrong! The curves were mislabeled. The corrected version (rescaled for greater clarity) is below:

Beware Charts_1

There was a jump in short term (1 year) expectations last month, with short term expectations of inflation dropping back this month.

Apart from that,as the next chart indicates, comparing 1 year ahead expectations with long term (10 year) inflation expectations, short term expectations are highly volatile.

Beware Charts_2

Maybe short term inflation expectations fluctuate according to oil price moves.

Beware Charts_3

2 thoughts on “Be careful when using other people´s charts!

  1. Marcus Nunes is King of the Charts!

    Excellent blogging.

    As ever, the blabber about inflation is besides the point anyway….targeting nominal GDP is what counts…..

  2. Pingback: TheMoneyIllusion » Mike Konczal provides two arguments against monetary offset

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