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MNI INTERVIEW: Fed May Need Unemployment To Rise To 7% - Ball

(MNI) WASHINGTON

Ex-Fed visiting scholar Laurence Ball says sustainable inflation requires fewer vacancies than unemployed workers.

The Federal Reserve’s view the jobless rate will rise to 4.4% over the next two years is a step in the right direction but is unlikely to be enough to stem underlying inflationary pressures in the U.S. economy that could require unemployment rising to 7%, former Fed visiting scholar and consultant for the IMF Laurence Ball told MNI.

The Fed last week not only increased borrowing costs by 75 basis points for a third meeting in a row but also projected the unemployment rate will slope upward 0.7ppts from now to 4.4% before staying put for about two years.

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The Federal Reserve’s view the jobless rate will rise to 4.4% over the next two years is a step in the right direction but is unlikely to be enough to stem underlying inflationary pressures in the U.S. economy that could require unemployment rising to 7%, former Fed visiting scholar and consultant for the IMF Laurence Ball told MNI.

The Fed last week not only increased borrowing costs by 75 basis points for a third meeting in a row but also projected the unemployment rate will slope upward 0.7ppts from now to 4.4% before staying put for about two years.

Keep reading...Show less