Options market offers central banks a way to build commodity price futures into thinking

  • 📰 BDliveSA
  • ⏱ Reading Time:
  • 31 sec. here
  • 2 min. at publisher
  • 📊 Quality Score:
  • News: 16%
  • Publisher: 63%

Ireland News News

Inflation modelling this century has been centred on prices excluding food and energy, removing the economy’s volatile elements — that is precisely the opposite of what we need now

The Bank of England in London, Britain. Picture: REUTERS/HANNAH MCKAY

As a result, forecasting inflation in 2022 has become more art than science. What would be the Saudi king’s response to US pressure to boost oil production? What’s Vladimir Putin going to do with Europe’s gas supply? How will Beijing react to record high coal prices? Perhaps that’s beyond the expertise of any central banker. Instead, most of them rely on rather unsophisticated tools to incorporate commodity markets into their models.

And yet, in the very same study, the authors argued that the bank should continue using the futures curve for its forecasts. One reason? It’s easier.

 

Thank you for your comment. Your comment will be published after being reviewed.
Please try again later.
We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

 /  🏆 12. in İE

Ireland Ireland Latest News, Ireland Ireland Headlines