Ignoring the low unemployment rate and paying more attention to what happens with inflation may not be a wise strategy for Federal Reserve officials, according to a new paper by researchers at the U.S. central bank.
“Policy needs to take proper account of the prospects for persistently tight labor markets leading to higher inflation, or other imbalances, that could eventually endanger prospects on the employment side of their policy mandate," a group of top Fed economists led by Christopher Erceg wrote in the paper, which was published Thursday on the Fed’s website.
