Will the Fed’s policy shift start a trend?

IN 2018, WHEN America’s long recovery from the 2007-09 financial crisis pushed the unemployment rate below 4%, the Federal Reserve had a simple message for American workers: do not get used to it. The central bank’s economic projections revealed that its officials believed 4.5% to be the lowest sustainable jobless rate, to which America would need to return to stop inflation surging upwards. If higher interest rates and slower growth were needed to achieve that, so be it.

On August 27th Jerome Powell, the Fed chairman, acknowledged what common sense suggested two years before: that an intentional increase in unemployment is an odd thing to pursue after nearly 20 years of depressed labour-market conditions. Speaking at an annual central-banking shindig, Mr Powell unveiled the conclusions of a monetary-policy strategy review begun in 2019. The coming changes to Fed policymaking could initiate an important global shift in central-bank practice.