'Given the latest data, it would be irresponsible for the Fed to create much higher unemployment deliberately.'
The standard justification for Fed policy tightening is that it is needed to prevent a cycle of self-fulfilling expectations, with workers and businesses coming to expect higher inflation and setting wages and prices accordingly. But this cannot happen when inflation expectations are declining, as they are now.to get inflation back down to the Fed's target level.
Given the latest data, it would be irresponsible for the Fed to create much higher unemployment deliberately, owing to a blind faith in the Phillips curve's ongoing relevance. Policymaking is always conducted under conditions of uncertainty, and the uncertainties are especially large now.
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