Money
Senior Fed official warns of 'risk' to US labour market
The Fed has a dual mandate to keep prices stable and maximise sustainable employment, and has spent much of the last two years hiking and then holding interest rates in order to bring US inflation down toward its long-term target of two per cent. — Reuters pic

WASHINGTON, June 25 ― The US labour market is at a point where it could become a greater issue for the Federal Reserve going forward, a senior official at the central bank said yesterday.

Advertising
Advertising

The Fed has a dual mandate to keep prices stable and maximise sustainable employment, and has spent much of the last two years hiking and then holding interest rates in order to bring US inflation down toward its long-term target of two per cent.

So far, it has managed to sharply reduce inflation while causing only a slight easing to the labour market, and the unemployment rate to remain close to a half-century low.

But historical data suggest that this "benign outcome” could be less likely in future, with the potential for a greater rise in unemployment, San Francisco Fed President Mary Daly said yesterday.

"Going forward, this tradeoff may not be as favourable,” Daly, who has a vote on the Fed's rate-setting committee this year, said in prepared remarks for an event in San Francisco.

She highlighted the relationship between job vacancies in the economy and the unemployment rate ― known as the Beveridge curve ― saying it suggests that "future labour market slowing could translate into higher unemployment, as firms need to adjust not just vacancies but actual jobs.”

"At this point, inflation is not the only risk we face,” she added. "We will need to keep our eyes on both sides of our mandate ― inflation and full employment ― as we work to achieve our goals.” ― AFP

Related Articles

 

You May Also Like