NAIRU: The “Holy Grail”

Tim Duy, the quintessential “Fed Watcher”, has a detailed discussion of the FOMC Minutes: This Is Not A Drill. This Is The Real Thing.  He then gives his thoughts, the last of which summarizes them:

E.) Of all the divisive points above, I think the most important is the debate over the level of full employment. The ability of the doves to slow the pace of subsequent rate hikes will hinge on their willingness to push for below NAIRU unemployment to alleviate underemployment.

Which puts the Fed in a very bad light, square in the Phillips Curve camp, with the long discredited NAIRU being the “holy grail” in determining Fed policy!

4 thoughts on “NAIRU: The “Holy Grail”

  1. Even for someone with a NAIRU framework, I can’t understand why they are so terrified of the possibility of 2.3% inflation with an economy growing by less than 200,000 jobs per month. I would have thought that the path of the 10 year bond since the December rate increase would have made them more leery. In some ways I envy people with this much self confidence in their opinions.

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