For some at the FOMC, it´s all about the “unemployment theory of inflation”

As reported: Officials say they remain confident such low unemployment will be enough to lift inflation toward their 2% target in coming years, meeting the Fed’s twin objectives of stable prices and maximum, sustainable employment. There are, however, exceptions. One is Bullard: The U.S. unemployment rate declined to 4.4 percent in the April reading. Does this mean that U.S. inflation is about to increase substantially? The short answer is no, based on current estimates of the relationship between unemployment and inflation. Another is Lael Brainard, albeit more tentatively: I see some tension between signs that the economy is in the…

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