Duy: Fed Updates

Tim Duy provides a number of thoughts, and I'd like to highlight one: Fed Updates

3.) Fed ready to lower NAIRU?  I have argued in the past that if the Fed is faced with ongoing slow wage growth, they would need to reassess their estimates of NAIRU.  Cardiff Garcia reminded me:

@TheStalwart @TimDuy Whether/extent to which Fed reverts nat-rate estimates to pre-2010 range is one of 2015's big Qs pic.twitter.com/CKieHx2zRC
— Cardiff Garcia (@CardiffGarcia) February 4, 2015

While David Wessel adds today:

JPMorgan run the Fed's statistical model of the economy and says the NAIRU (which was 5.6%+ through 2013 data) is now down to 5%.
— David Wessel (@davidmwessel) February 5, 2015

Jim O'Sullivan from High Frequency Economics says not yet:

"Hard-to-fill" @NFIB jobs series up to 26 in Jan (+1). Corroborates unempl decline, with no sign of lower #NAIRU pic.twitter.com/DVYGyGV4e6
— Jim O'Sullivan (@osullivanEcon) February 5, 2015

A reduction in the Fed's estimate of the natural rate of unemployment would likely mean a delayed and more gradual path of policy tightening, should of course the Fed ever get the chance to pull off the zero bound.  Keep an eye on this issue!

There is much more in Duy's post.