U.S. Economy Slack Justifies Stimulus, Top Fed Staff Papers Show

The Federal Reserve’s policy of seeking to drive down the U.S. unemployment rate is effective, and the level of slack in the economy justifies an accommodative stance, according to two separate papers by top Fed officials.

William English, head of the Division of Monetary Affairs, wrote that the strategy of not raising interest rates if unemployment is above 6.5 percent has provided effective stimulus, and that an even lower threshold could be helpful. A paper by David Wilcox, the research and statistics chief, says that slack in the economy argues for loose policy at a time of contained expectations for inflation.