""For me, relaxing the policy rate to make sure it continues to be modestly restrictive - but not so restrictive that it unnecessarily disrupts the labor market - would be the path of policy," Daly, a trained labor economist, tells Axios."
""It's not that we've already fallen off a cliff," Daly says, referring to the health of the labor market, where hiring has slowed to a crawl but the unemployment rate has held at a historically low level. "I don't want to hit the point where there would be a precipitous increase in unemployment.""
""Think of the jobless recoveries we had: As long as inflation wasn't rising, monetary policy was accommodative and supportive of continued growth in the labor market," she notes. "We weren't saying, 'Oh, growth is good, so we're fine.'""
Policy should be relaxed slightly to keep interest rates modestly restrictive rather than so tight that they unnecessarily disrupt the labor market. There is room for some rate cuts while still maintaining modest restrictiveness. Hiring has slowed substantially even as unemployment remains historically low, creating downside risk that joblessness could rise. The Beveridge Curve indicates a potential tipping point toward higher unemployment. The central bank mandate prioritizes price stability and full employment rather than growth. Past jobless recoveries show accommodative policy can support labor market growth when inflation is not rising; tariff uncertainty previously delayed cuts.
Read at Axios
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