Benn Steil

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A graphical take on geoeconomic issues, with links to the news and expert commentary.

Is the Fed’s Zero-Rate Pledge Hostage to an Inflated Employment Target?

by Jon Hill Monday, May 21, 2012
Labor Force Participation Rate

The Fed has a dual mandate to promote stable prices and maximum employment.  With current inflation near the Fed’s long-run target of 2% and unemployment well above estimates of its “natural rate,” Fed chairman Ben Bernanke and NY Fed President William Dudley have understandably stressed their commitment to the second part of the mandate.  Indeed, the Fed’s recent pledge to hold interest rates near zero through 2014 reflects their concern that unemployment will only decline slowly in the coming years, unlike in previous recoveries.  Read more »