BREAKING NEWS The Royal Swedish Academy of Sciences has decided to award the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Robert E. Hall and Michael Woodford “for microeconomic foundations of macroeconomic stabilisation.” #NobelPrize

Good to chat with @kaitborsay just now about the fragility of the UK's fiscal position. Credibility requires immediate action on fiscal consolidation not yet more can kicking. It cannot wait. @CamEcon @TimesRadio

Given a rapidly changing market sentiment this week, I thought I should set out my full answers to @CityAM and @MauricioFCA_ which were sent over the weekend. 1. What would your vote on interest rates be?  Raise 50 bp, raise 25bp, hold, cut 25bp, cut 50bp Raise 25bp to 4%. 2. What has influenced your decision?  Since June 2021, we have been at or below the inflation target in only four months out of sixty-three: we need to re-state our credentials for maintaining price stability. And not focus on over-engineering (or discussing) quarter point movements in response to high frequency and noisy data in a risky world. During this business cycle monetary policy has simply not met its prime objective and inflation expectations, although measured with some error, look to have become entrenched at a level inconsistent with price stability. Alongside a firmer stance against inflation, communication must be more consistent about the need to act with vigilance against inflationary impulses and not to look for excuses to cut rates. Drop fine tuning – the models are not good enough. 3. Are market views on UK gilt pricing correct and/or fair? The bond markets are sending two distinct signals that must be absorbed: that we have not got our interest rate path in the right place to achieve price and that the government shows little appetite for a fiscal consolidation. We need to understand that they are actually acting as critical friends to a monetary-fiscal mix that is just in the wrong place. 4. Additional comments It would be good to wean markets off their attachment to abundant reserves and continue QT subject to financial institutions’ preferred minimum rate of reserves. But some reduction in the pace of asset sales may be sensible given elevated bond yields. The recent edited book by my friend Francis Breedon (Quantitative Easing and Tightening - Lessons After the Financial Crisis) is relevant here. I would continue to ask for a comprehensive and full response from the BoE to the April 2024 Bernanke Review. @econromesh @CamEcon @MMF_research @phillipinman @MortimerleePaul @HannoLustig @haskelecon @EconSteveM @drevalentino @commonstreasury