Some Like it Hot: Monetary Policy Under Okun`s Hypothesis

0 / 29 Meant to be asymmetric ⇒ Lower for longer (LfL) strategy following recessions with the desire of running the economy hot for longer with the intent of being more ‘inclusive’ toward low-wage workers One clear takeaway from the Fed Listens events was the importance of sustaining a strong job market, particularly for people from low- and moderate-income communities. [...] Maximum employment: broad based and inclusive goal Meant to be asymmetric ⇒ Lower for longer (LfL) strategy following recessions with the desire of running the economy hot for longer with the intent of being more ‘inclusive’ toward low-wage workers 1 / 29 New Monetary Policy Framework of the Fed New features of the dual mandate: 1. [...] Maximum employment: broad based and inclusive goal Meant to be asymmetric ⇒ Lower for longer (LfL) strategy following recessions with the desire of running the economy hot for longer with the intent of being more ‘inclusive’ toward low-wage workers One clear takeaway from the Fed Listens events was the importance of sustaining a strong job market, particularly for people from low- and moderate-inc. [...] At a cost of 40-50bp of higher average inflation, the new framework reduces average unemployment by 1.75ppt, raises participation by 2.25ppts, and boost real earnings per worker by 5.5% for the bottom quartile of the skill distribution. [...] At a cost of 40-50bp of higher average inflation, the new framework reduces average unemployment by 1.75ppt, raises participation by 2.25ppts, and boost real earnings per worker by 5.5% for the bottom quartile of the skill distribution.