This column presents evidence on the role that US monetary policy plays in how fiscal spending affects the economy. A dovish Federal Open Market Committee (FOMC) delays policy rate increases, while a hawkish FOMC tightens monetary policy more promptly, following increased fiscal spending. We show that the dovish response supports fiscal expansions. In contrast, the hawkish response results in a GDP decline but effectively controls inflation expectations.

Recent advances in artificial intelligence have been met with anxiety about the future of jobs. This article examines the link between AI-enabled technologies and employment shares across 16 European countries, finding that occupations potentially more exposed to AI-enabled technologies increased their employment share during the period 2010-19. This has been particularly the case for occupations with a relatively higher proportion of younger and skilled workers.

Inflation forecasts and their risks are key for monetary policy decisions. The strategy review concluded in 2021 highlighted how most Eurosystem models used to forecast inflation are linear. Linear models assume that changes in, for example, wages, always have the same fixed, proportional effect on inflation. A new machine learning model, recently developed at the ECB, captures very general forms of non-linearity, such as a changing sensitivity of inflation dynamics to prevailing economic circumstances.

Climate change has implications for price stability and the work of central banks. It may increase the volatility and heterogeneity of inflation, and hotter summers may lead to more frequent and persistent upward pressures on food and services inflation. Our empirical study provides evidence for the four largest euro area economies and outlines the relationship between temperature and inflation.