Krugman writes: "Headline unemployment, at 5.1 percent, is now quite low by historical standards, and the baying for a rate increase is louder than ever. But inflation is subdued, indeed below target, and wages are still going nowhere. Should the Fed be raising rates in the name of 'normalization?'"
Paul Krugman. (photo: The New York Times)
The Fed Should Remember the 90s
05 September 15
’m (a) having a good time (b) jet-lagged to the point of madness, so posting limited. But I do want to weigh in on the latest job report and the Fed.
Headline unemployment, at 5.1 percent, is now quite low by historical standards, and the baying for a rate increase is louder than ever. But inflation is subdued, indeed below target, and wages are still going nowhere. Should the Fed be raising rates in the name of “normalization”?
Well, consider the situation in 1997, when the unemployment rate dropped through 5 percent. The Fed did raise rates a quarter point, but then stopped, waiting for inflation to become a problem — which it never did, even though unemployment continued to fall, eventually to 4 percent.
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