The Federal Reserve will probably scrap its 6.5 percent unemployment rate threshold and switch to qualitative guidance for signaling when it will consider raising the main interest rate, according to economists in a survey.
Janet Yellen says Federal Reserve policy makers need to look at a broader range of data to get a good handle on the job market. She hasn’t highlighted one labor indicator that economists say is sounding inflation alarms: short-term unemployment.
Federal Reserve Governor Jeremy Stein endorsed a warning by economists that raising the main interest rate may cause a financial-market convulsion similar to the “tantrum” that occurred last year after the Fed said it was considering trimming its bond purchase program.
The economic expansion in the U.S. is sufficiently entrenched to withstand a short-term slump in stock prices and weakness in emerging markets, keeping the Federal Reserve on track to trim stimulus, economists say.