Central bankers must be using some other dictionary than the one available to all the rest of the world. Janet Yellen, for example, abused the word “transitory” for so long it became unrelatable to the concept of time; which was its original meaning. It evolved into an excuse for explaining how forecasts weren’t wrong, they just applied always to the future.

Mario Draghi this week has introduced a new one. Speaking to the European Parliament in Brussels, the head of the ECB was caught in somewhat of a bind. Several, well, they’re not really government officials (parliamentarians?), establishment types were edgy over Draghi’s patient resolve. Get on the with the rate hikes, they told him, the economy is so good.

Don’t be in a rush, he countered. He sees the same “relatively vigorous” pickup in underlying inflation conditions as they do. But they are the only ones who can. Even though the ECB’s official projections show only 1.7% inflation this year and next, this, Draghi testified, apparently conceals the major economic improvements in Europe’s overall condition.

In other words, inflation pressures are so vigorous you can’t see them. That’s why the ECB has to go at a determined pace, taking deliberate and careful action so as to not disturb all the vigor. Oz is really the Great and Powerful. There are no curtains to pull back.

The good folks at Eurostat probably should have sent the ECB head a memo before his Belgian appearance. Or maybe they did and that’s why Draghi went with this new dictionary definition, where vigorous applies to the invisible. For yet another month, the inflation indices show nothing. The headline rate, on only oil prices, was barely 2% again in the flash reading for September 2018.

The “core” HICP index gained only 0.9%. Since the ECB started its QE program in March 2015, the core inflation rate has been above 1% in only seven out of thirty months. Only twice this year. 

Draghi and the current Chairman of the Federal Reserve Jerome Powell seem to be using the same speech writers, which might explain the broadening use of Yellen’s dictionary.

Underlying inflation is expected to increase further over the coming months as the tightening labor market is pushing up wage growth. Domestic price pressures are strengthening and broadening.

If I didn’t tell you that was Draghi on Monday you would be forgiven for thinking it was Powell on any other day. All these labor shortages and wage gains are happening everywhere, we just can’t see them anywhere. Vigorous and transitory. They’ve redefined the very notion of recovery, why not everything else related to it. 

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