The Washington post reports the Federal Reserve has a problem with three numbers, 5, 3 and 2
According to Federal Reserve published forecasts, Fed officials think
- the lowest unemployment rate consistent with stable inflation is just below 5%
- Their long-term neutral interest rate is 3%
- And for them, stable inflation means price growth of 2% (their inflation target)
But, the piece says that each of these numbers is probably wrong and at least some of the officials know it:
- The Fed has consistently been undershooting its 2 percent inflation target
- And b) as actual unemployment has hit the Fed's full employment rate, inflation hasn't sped up at all
Ahead of Jackson Hole (and what some commentators around this place may be a bombshell from Yellen, hinting of a rate hike soon) the article is worth a read. It may be gated: The 5, 3, 2 problem at the Federal Reserve
