Policymakers should focus on slack even amid uncertainty – Fed paper

Federal Reserve

Policy-makers facing uncertainty over the natural rate of unemployment should not necessarily focus their attention on inflation, in contrast to the advice of some earlier literature, according to research published by the Federal Reserve.

The team of Fed economists notes the “standard advice” from the literature is to reduce the weighting of unemployment when setting monetary policy if the natural rate (u*) is uncertain. Targeting unemployment too aggressively could hold it away from its

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