ICYMI – Ex-ECB Constancio says September rate cut only a 50-50 chance – inflation concern

Former ECB Vice President Vitor Constâncio on Thursday, tips a 25bp rate cut from the Federal Open Market Committee (FOMC) in September but the same from the European Central Bank is a coin toss:

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Note that final line from Constancio on ‘normative’ terms. He draws a clear distinction between what he thinks will happen and what he thinks should happen. Many forecasters fail to make this distinction, to their cost, and ours if you pay them any heed.

Normative economics is a branch of economics that deals with value judgments and opinions about what the economy should be like or what particular policy actions should be recommended to achieve a desirable outcome. It contrasts with positive economics, which focuses on describing and explaining economic phenomena without making judgments.

Normative economics involves statements that are subjective and based on personal beliefs, ethics, or societal goals. For example, saying “the government should increase the minimum wage to reduce poverty” is a normative statement because it reflects an opinion on what ought to be done, rather than an objective analysis of the effects of increasing the minimum wage.

In summary, normative economics is about what should be done in the economy based on values and opinions, rather than what is actually happening.

This article was written by Eamonn Sheridan at www.forexlive.com.