The Federal Reserve may need to forge ahead with yet more jumbo interest-rate rises, despite other signs of slowing economic growth
Ever since the Federal Reserve began tightening monetary policy earlier this year, economists have debated how big a trade-off there will be between inflation and jobs. Actions by the Fed to tame prices inevitably lead to weaker growth, weighing by extension on the labour market. Jerome Powell, chairman of the Fed, has long insisted that labour-market tightness may mean there is a path whereby companies can reduce their demand for new workers without large numbers ending up on the dole.
To understand the debate, consider the non-accelerating inflation rate of unemployment, known more commonly by its acronym,, or simply as the natural rate of unemployment. It refers to the lowest level of unemployment that an economy can sustain before wage inflation starts to accelerate. The concept ofwas once central to economic analysis and to the Fed’s thinking about rates.
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