The Fed became much more dovish at its recent meeting, lowering its prediction for the Fed Funds rate at the end of the year. Yet the Fed is still predicting that 'excess' unemployment will fall further, which should make it more hawkish. Is this divergence because of concerns that the unemployment gap is actually larger than it looks, or concerns about lags in the relationship between the unemployment gap and inflation? Or is it a policy error?
About the authors
Economist Insights is written by Joshua McCallum and Gianluca Moretti. Joshua has been working at Global Asset Management with the title of Senior Fixed Income Economist since 2005. Prior to this, he worked at the UK Treasury as a macroeconomist. Gianluca joined Global Asset Management in 2010. Prior to this he worked at the Italian central bank.
The products, services, information and/or materials contained within these web pages may not be available for residents of certain jurisdictions. Please consult the sales restrictions relating to the products or services in question for further information.
© UBS 1998 - 2015. All rights reserved.