loud119 t1_it96auu wrote on October 21, 2022 at 9:09 PM

Reply to comment by LeroyoJenkins in [OC] Inflation rate and nominal interest rate by giteam

Technically true for academic analysis but since inflation isn’t expected to whipsaw rapidly over the next few months this is a really helpful visual proxy if you were to explain to someone the concept of real vs Nominal rates.

XkF21WNJ t1_it9qjro wrote on October 21, 2022 at 11:43 PM

Surely inflation is expected to go down at some point? It seems unlikely that prices would continue to increase rapidly indefinitely.

Of course we wouldn't suddenly get a large spike of deflation as prices go down again, wages are already adjusting to the new price point which means it's probably stuck for now (not necessarily a bad thing, to some extent it's the economy fixing itself by devaluing old money).

Inflation is the derivative of the price level though, it would be weird for inflation to stay record high two years in a row.

Also 'difference with 12 months ago' is useful as a metric, but behaves a bit oddly when you want to estimate the derivative of something that changes rather quickly. It doesn't filter out high frequency stuff, it mostly just filters periodic patterns that repeat yearly.

LeroyoJenkins t1_it9b8di wrote on October 21, 2022 at 9:45 PM

Which would be accurate if it were inflation rate over the last 12 months vs. nominal interest rates over the past 12 months.

As it is, it doesn't make much sense, other than conveying a wrong sense of absurdity.