• US Unemployment, Congress, and the Fed – December 2012

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“Both the Fed and Congress need to do more to help: ”If Washington surprised everyone and struck an intelligent fiscal bargain in the next fortnight, the US labour market would still take years to regain its pre-recession level. It is thus encouraging that the Fed is looking at how to improve its zero interest rate guidance. ”At the moment it forecasts low rates until at least mid-2015 – a somewhat arbitrary date. It would be logical therefore to replace that with a trigger that linked interest rates with unemployment – say a threshold of 6.5 per cent. It would also make sense were lawmakers to do the same for unemployment insurance and the payroll tax holiday, both of which are about to expire. ”Unfortunately, Congress is not in such an innovative frame of mind.” Source: Financial Times

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