Wednesday, August 13, 2008

Hawk or dove?

US and EU are both still facing inflation threat. Relatively, US' Fed is more dovish and EU's ECB hawkish. Why? Trade unions matter, says Marty Feldstein (HT. Mankiw).

How about Pak Boediono's BI? He said that BI would bring down inflation to 6-7.5% in 2009. But given the recent development that sounds too ambitious. (Unless Pak Boed becomes more hawkish. That is, to raise the BI rate again for, say, 50% then 25%. Keeping the margin at 25 bps might not be strong enough. A 50 bps should send a firmer message to help shape the expectation).

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