Are Central Banks Outright Lying About Inflation?

Are Central Banks Outright Lying About Inflation?

According to Bank of America, “Once inflation is above 5% in advanced economies, it takes an average of 10 years to drop to 2%”. Analysts at the US bank have studied cases where there has been inflation above 5% in advanced economies between 1980 and 2000 and have found that “it took an average of 10 years to bring it back to 2%”.

But the ECB experts, although they have revised their inflation projections significantly upwards, expect it to be, on average, at 8.1% in 2022, 5.5% in 2023 and 2.3% in 2024. Namely, in just two years, it would almost return to that level of 2%.

This is how the CPI evolved in the euro zone up to the month of August included, when a maximum of 9.1% was reached.

Euro zone CPI
Euro zone CPI

Are these Bank of America forecasts realistic? In Investment Strategies, Pablo Garcรญa, director of Divacons Alphavalue, explains that they are perhaps too exaggerated and that we must take into account that much of the weight is due to energy:

Euro zoneEuro zone
Euro zone

Although core inflation has also risen, it is in turn a reflection of how companies are passing on this rise in energy prices which, on the other hand, is beginning to moderate in recent weeks.

so it has moved dutch gas price, of reference in Europe, during the last year; As we can see in the graph, after rebounding strongly and, although still at high levels, prices have been moderating.

TTF Dutch GasTTF Dutch Gas
TTF Dutch Gas

(Natural Gas Futures)

Also the oil it has cut ground in recent weeks and recently touched levels below $85 for the first time since January this year, before the conflict in Ukraine erupted.

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In the United States, where they do not have the same energy problem as Europe, the Fed is also optimistic in its forecasts. According to the agency, inflation would rise to 4.5% at the end of 2022to 3.1% at the end of 2023 and to 2.3% in 2024.


Although prices are moderating there and there is hope of having reached the peak, economic growth is now a concern. The issuing institute has lowered its forecasts for the US economy and now expects to grow 0.2% in 20221.5 points less than in June.

Meanwhile, from BlackRock, they warn that the Federal Reserve has overly optimistic economic forecasts that do not reflect the real damage that the rate hike will do to the US economy. This same Tuesday, the president of the Chicago Federal Reserve, Charles Evans, said today that he had some concern about the possibility that the US agency is raising interest rates too quickly.

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