As the U.S. jobless rate creeps ever closer to the Federal Reserve’s definition of full employment, some Fed officials are asking a question: How low can you go?
Their answer: less than the 5.2 percent to 5.5 percent the Fed currently defines as the lowest that can be achieved without heating up inflation. Some Chicago Fed economists say this sweet spot, often called full employment or the natural rate of unemployment, may be as low as 5 percent.
Their boss, Chicago Fed President Charles Evans, is among policy makers who have lowered their estimates for the normal rate. “I now think that it might be something more like 5.0 percent,” Evans said in a speech Wednesday.
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