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Retail Sales Epicycles

Another example of epicycles in action.

Yesterday, the Federal Reserve reaffirmed its commitment to achieving a 2% inflation target. Monetary policy often moves in cycles: inflation rises, policymakers tighten; inflation subsides, confidence returns, and the monetary reins are loosened once again. \n Using 16 cycles, I modeled the 10-Year Breakeven Inflation Rate with an epicycle reconstruction. What caught my attention is the forecast on the far right. Given the recent decline in oil prices, the projection may not be as far-fetched as it appears: inflation pressures ease, only to re-emerge later in the cycle. \n History may not repeat exactly, but it often rhymes—and sometimes it traces circles.

Run the analysis in RainbowStats

Script

epicycles(T10YIE,16)

Related Topics

• Inflation
• Fed Policy
• Fourier decomposition
• Time-series reconstruction
• Economic data visualization

Related Commands

• epicycles
• logdiff

RainbowStats continues to evolve as a platform for combining financial modeling, econometrics, and interactive visualization.