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Bernanke and Blanchard conclude that because inflation today reflects a too-hot labor market, the solution is to cool it off.

 To bring inflation back to the Fed’s target, they estimate unemployment would have to rise above 4.3% from its current 3.4% assuming vacancies remain difficult to fill.

But, they say, inflation could drop without a significant increase in unemployment if the ease of hiring returns to prepandemic norms. The good news: There are tentative signs that is happening.

Greg Ip  WSJ 23 May 2023


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