My last short post was a month ago. At that stage post-Covid it was seriously taxing to read anything more demanding than Trollope, let alone even think about writing anything.

But with time, things improve. I had even harboured thoughts of a serious post this week – the one I’d like to write is about how we assess the culpability of central banks for the current and prospective inflation outcomes.

But….I had a commitment to write a 1000 word book review for a publication I write for. I did a draft of that yesterday, and doing so so badly knocked me back I won’t be trying anything similar for a while yet.

The gist of the post would have been:

1. Based on the information, understanding, and risks at the time, interest rate cuts in early 2020 were well-warranted.
2. (Core) inflation outcomes (globally) are largely the outcome of monetary policy choices 12-18 months previously.
3. 12-18 months previously no one was forecasting inflation (or unemployment) outcomes akin to what we actually now see (check RB forecasts, NZ private sector forecasts, or overseas official or private forecasts).
4. That was a huge forecasting/understanding error, but……it is hard to hold central banks very culpable when no one much else saw the outlook any better (even if it is their specific job).
5. There is much more culpability about sluggish policy responses (or lack of them) from about a year ago, as the upside risks became increasingly apparent. Central banks took a punt, which hasn’t worked out, and we are all paying the price (in NZ it wasn’t until February that the OCR got to pre-Covid levels and the Funding for lending crisis programme is still running).
6. Serious scrutiny of central bank policymakers is now warranted, with a presumption against reappointment (but here two were just reappointed).
7. Oh, and the massive losses to the taxpayer from the bond buying programmes – purchases often occurring well after it was clear worst-case downside outcomes were no longer likely – are something central bankers are entirely culpable for.

And the book? Two Hundred Years of Muddling Through: The Surprising Story of the British Economy by UK journalist Duncan Weldon. It is short (300 pages), accessible (even chatty), judicious, informed by the literature, and strongly recommended (especially for the period up to about 1950) for anyone who wants to know a bit more economic and economic policymaking history. I’ve read a lot in that area, and so probably didn’t learn a lot new, but was interested to learn that on the eve of World War One, not only was the UK “the dominant manufacturer of exported goods, the centre of international finance” but also “the world’s largest net energy exporter” (that was the coal).