Beyond asset prices, the quantities of consumer borrowing and bank lending have also shown signs of stabilizing (or modest acceleration) in the second half of 2023. None of this is what one would expect if policy were actually “restrictive”. The argument from Fed officials is that none of this matters. As Governor Chris Waller put it recently, “if inflation goes down, you would lower policy the rate”. But the inflation data are telling us only what has already happened, while interest rates are supposed to be forward-looking. Setting the future price of money based on last year’s price increases is nonsensical. As it happens, inflation had always been expected to slow, which is why breakevens never went above 4%. Moreover, these market-implied inflation premiums have not budged in over a year. The danger is that they may instead be shifting from “neutral” to “unnecessarily stimulative” because they are calibrating policy with a faulty backward-looking model.
- Date Posted:
- December 14, 2023
The number of babies expected per woman probably dropped this year to 0.72 and will continue to fall through 2025, when it’s expected to reach 0.65, the statistical office said Thursday in its latest population forecasts. South Korea already has the world’s lowest fertility rate at 0.78 as of 2022. Low fertility threatens to undermine South Korea’s economic future by shrinking its workforce and slowing consumption. It also casts a long shadow over national security by reducing the pool of men available to join the military to counter threats from North Korea. The latest forecast by Statistics Korea puts the population in 2072 at 36.2 million, a 30% decline from the current 51.7 million, even though the fertility rate may recover a bit to 0.68 in 2026. The population is expected to fall every year starting in 2025.