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MNI: Fed Must Cool Job Market - Ex-Officials

(MNI) Washington
WASHINGTON (MNI)

Fed may have to go beyond diminishing job opening levels and help raise unemployment, sources say.

The Federal Reserve needs to take the steam out of a historically tight labor market to increase economic slack, former Fed officials and staff told MNI, with some suggesting that the unemployment rate will have to rise to 4% or higher to be compatible with its inflation objectives.

While the March Statement of Economic Projections implies monetary tightening will cool the labor market simply via a lower rate of job openings than the 400,000 per month average seen over the past 11 months, a jobless rate at March’s post-pandemic low of 3.6% and wages growth at 5.6% are too hot for the Fed’s comfort, the former officials and staff said.

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The Federal Reserve needs to take the steam out of a historically tight labor market to increase economic slack, former Fed officials and staff told MNI, with some suggesting that the unemployment rate will have to rise to 4% or higher to be compatible with its inflation objectives.

While the March Statement of Economic Projections implies monetary tightening will cool the labor market simply via a lower rate of job openings than the 400,000 per month average seen over the past 11 months, a jobless rate at March’s post-pandemic low of 3.6% and wages growth at 5.6% are too hot for the Fed’s comfort, the former officials and staff said.

Keep reading...Show less