Fed shouldn’t use wages as beacon

For years, the US Federal Reserve steered monetary policy in part by wage growth: drive slack out of the labour market and higher wages, and therefore inflation, should follow. But fishing for inflation in this recovery, the Fed has been using the wrong bait, reading the water incorrectly and getting no bites. I look at why wages aren’t growing and why inflation wouldn’t accelerate even if they did: https://www.ft.com/content/821ee35c-a7a5-11e9-90e9-fc4b9d9528b4

ECB has the biggest bazooka

When European Central Bank president Mario Draghi leaves his post in October, most analysts will say his greatest legacy was saving the euro. That’s nothing to sniff at, but years from now I think we will have discovered an even more important legacy: the ECB has created and implemented the biggest monetary policy bazooka out there and we should all look to adopt it in the next serious downturn: https://www.ft.com/content/58a4af28-80a1-11e9-a7f0-77d3101896ec

Fiscal stabilizers are crucial

For all the focus on central banks to step in and fight the next downturn, there are tools outside of monetary policy that could be employed. In this Alphachat Podcast, I talk to Jay Shambaugh about fiscal stabilizers and why we should focus on establishing them now while times are good: https://www.ft.com/content/92dea877-1c35-4a98-b24f-9fb8b4d122ec

Personal News

Some personal news! I’ve recently started as a Senior Fellow at the Mossavar-Rahmani Center for Business and Government (M-RCBG) at the Harvard Kennedy School. I’ll spend the year doing a little teaching and a lot of writing (my regular Financial Times column, as well as a book). So far it has been fantastic, though if any of you have tips on cycling to work in Boston in the winter, I am all ears…