The natural rate of unemployment has become an important topic recently as the Federal Reserve has raised short-term interest rates in an attempt to keep the economy from overheating. The natural rate represents the lowest possible unemployment rate that is consistent with stable inflation. As the economy has approached its natural rate this year, the Federal Reserve has taken a series of timely policy actions. Weiner examines the close historical relationship between the natural rate and inflationary pressures and discusses near-term policy implications.> This article is an updated version of remarks made before the Board of Directors of the Federal Reserve Bank of Kansas City on April 7, 1994. Underlying research results are reported in the author's "New Estimates of the Natural Rate of Unemployment," which appeared in the Fourth Quarter 1993 issue of Economic Review.
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Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.
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