According to Goldman's top economist, Joe Hatzius, two key economists at the Fed have published research indicating the FOMC will lower the level at which it...

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According to Goldman's top economist, Joe Hatzius, two key economists at the Fed have published research indicating the FOMC will lower the level at which it would start considering rate hikes. Currently the Fed is operating under something called Evan's Rule, which says that that the Fed will not think about rate hikes until either unemployment falls to 6.5% or inflation rises to 2.5%. Hatzius believes that the Fed will lower the unemployment threshold from 6.5% to 6.0%. This constitutes easing in that it implies low rates for a longer time. The research underpins what has now become the base case view at the bank. According to Hatzius, it is hard to overstate the importance of the two new Fed staff studies that will be presented at the IMF's annual research conference on November 7-8. (VIEW LINK)

economy us fomc

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John Robertson

I have not read these studies but the conclusion referred to would be consistent with comments by the Fed chairman that consideration would be given to the unusually and persistently low participation rate in framing any future unemployment target. See my comment and chart at http://www.eimcapital.com.au/portfoliodirect/daily_views0913.htm for 9 September on the employment-population ratio.

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