nairu - Fed Suggests It Is Loosening Employment-Inflation...

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As of Friday, February 16, 2007 Online Journal Subscribers LOG IN Special Offer Subscribe to the print Journal today and receive 8 weeks FREE! Click Here! Fed Suggests It Is Loosening Employment-Inflation Link By GREG IP February 16, 2007; Page A2 Federal Reserve officials appear to believe unemployment can go lower than they previously thought without generating inflation, a potentially important shift that some economists think could make interest-rate increases this year less likely. The monetary-policy report that Fed Chairman Ben Bernanke delivered to Congress this week indicated that members of the policy-setting Federal Open Market Committee now expect a lower unemployment rate this year than they did just seven months ago, but they don't expect that to result in higher inflation. Reduced inflation concerns at the Fed and weaker economic data, such as a drop in January industrial production reported yesterday, have led financial markets to boost expectations the Fed will lower its short-term interest-rate target, now 5.25%, later this year. FOMC members generally expect the unemployment rate to end both this year and next between 4.5% and 4.75%, essentially unchanged from January's 4.6%. By contrast, July's monetary- policy report saw the unemployment rate ending 2007 between 4.75% and 5%. That report didn't have a 2008 forecast. Despite forecasting lower unemployment, FOMC members didn't change their inflation expectations. They see core inflation, which excludes food and energy, as measured by the Commerce Department's price index of personal consumption, ending this year between 2% and 2.25% -- the same forecast as July -- and next year falling further, to between 1.75% and 2%. That shift probably reflects the fact that actual unemployment has fallen further than expected last July while inflation has also been a bit
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nairu - Fed Suggests It Is Loosening Employment-Inflation...

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