Author Danny Vinik

Inflation is 1.6%: So Let’s Tighten

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New CPI numbers are out this morning with headline CPI coming in at 1.8% and core CPI at just 1.6%. The Fed generally uses core CPI (which excludes food and energy prices) when it makes monetary policy as it is less volatile and more indicative of long-run inflation. Last month’s core CPI was 0.2% as was this month’s. On a year-over-year basis, the indicator fell from 1.7% in May to its current 1.6%. Yet, what have markets spent the last month talking about? When the Fed will start to tighten.

This continues to make no sense and has not made any sense for years now.

The Fed has a goal of 2% inflation. When inflation is less than that 2%, the Fed should instill looser monetary policy to raise it. When inflation is below 2% and unemployment is high, this should be a no-brainer. At the very very least, it shouldn’t be talking about when it will instill tighter monetary policy.

If the Fed were really sticking to its goal of 2% inflation, it would overshoot and undershoot it a relatively equal amount as it attempted to hit that target exactly. Instead, the Fed has consistently undershot its goal. Inflation has been below 2% for years now. Meanwhile, unemployment sits at 7.6%. There’s a real human and economic cost to the Fed’s persistent committment to undershooting its 2% target. Its talk over the past month of tapering has already raised mortgage rates. But let’s continue to talk about tightening with inflation coming in under target. That makes perfect sense.

Should You Stay Away From Hospitals on the Weekend?

Danny Vinik 1 Comment

Kevin Drum points us to a post by Austin Carroll that examines a study of infants who are admitted to the hospital because they aren’t gaining enough weight. The study looks at how long each infant stays at the hospital and how much the stay costs based on what day of the week the child is admitted. Here are the results:

Infant AdmissionsDrum takes this to be yet more evidence that not much gets done at hospitals on the weekend and it’s better to wait until a weekday to go. Obviously, the graph pretty clearly shows that hospital stays both last longer and cost more when the admission happens on a Saturday or Sunday. But is that really because “the babies just sit around over the weekend and then start getting treated on Monday?” Maybe, but wouldn’t you expect to see higher costs and longer visits on Friday?

After all, if a parent brings her child in on a Friday morning, receives treatment during the day and then only sporadic attention over the weekend, wouldn’t it be likelier that the visit would last longer than if the parent had brought the kid in on a Monday or Tuesday? If the parent had instead brought her child in on Sunday, received little attention during the day, but then began treatment on Monday, shouldn’t that visit be shorter than someone who brought her child in on a Friday?

In addition Carroll writes that “the number of procedures for children admitted on the weekend wasn’t any different than for children admitted on the weekdays.” Number of procedures isn’t a perfect proxy for quality of treatment, but it at least demonstrates that the infants were not just ignored the entire weekend.

Drum may be right here, but I’d like to see some more evidence for why that graph looks the way it does. No matter the reason though, I won’t argue with his conclusion: if you have the chance to choose what day of the week to enter the hospital, choose a weekday.