Award and citation

The Royal Swedish Academy of Sciences announced on Monday, 12 October, that the 2026 Nobel Prize in Economic Sciences goes to Robert E. Hall and Michael Woodford, two Americans. Hall, 83, teaches at Stanford University, while Woodford, 70, teaches at Columbia University in New York. The academy cited their work on the "microeconomic foundations of macroeconomic stabilisation". The prize carries 12 million Swedish kronor, about one million euro. The economics prize is not directly based on Alfred Nobel's will: the Swedish Riksbank created it in 1968 in his memory, and it has been awarded since 1969.

What the laureates built

According to the academy, the two developed new macroeconomic models that allow central banks and finance ministries to pursue better stabilisation policy. Rather than building models on statistical relationships between inflation, output and consumption, they chose a microeconomic foundation, examining how the decisions of individual households and firms add up to the wider economy. Il Giornale describes Hall's consumption research as building on Milton Friedman's permanent income idea with rational expectations, and notes that Hall co-devised a single-rate flat tax with Alvin Rabushka in the 1980s. The same outlet says Hall chaired the National Bureau of Economic Research committee that officially dates US recessions for decades. Woodford's textbook "Interest and Prices" is cited as a reference for central banks, and his work explores how interest rates and central bank communication shape the expectations of households and firms.

Reactions from the committee and economists

John Hassler, chair of the prize committee, said the laureates gave the models used by central banks and governments worldwide a solid theoretical base. He added that these models leave economies better placed to handle shocks.

“With them, we are better equipped to cope with economic shocks such as energy crises or sudden changes in household consumer behaviour.”

Woodford, reached by telephone during the announcement, called the award an enormous honour and said it was a great surprise that felt very good. Clemens Fuest, president of the Ifo Institute, said Hall shaped understanding of consumption, labour markets and the business cycle, and that Woodford showed how expectations and central bank credibility matter for monetary policy.

“Business cycle fluctuations, unemployment and inflation can only be understood if one takes into account how households and firms make decisions and how they respond to economic policy measures.”

Commentary on the Fed and inflation

Bloomberg commentary reads the prize as a message to the Federal Reserve, noting that Fed Chair Kevin Warsh has turned central bank "forward guidance" into a banned phrase. Il Messaggero writes that it is hard to imagine the award going to these two without the return of inflation and the need for monetary authorities to bring it under control. Rzeczpospolita links the laureates' work to high commodity prices, economic uncertainty and changing interest rates, arguing that expectations about the future matter as much as current decisions.