WASHINGTON — Federal Reserve Chair Janet Yellen says she's prepared to let the unemployment rate fall from its current 5.8 percent to exceptionally low levels, saying doing so should help cause inflation to rise closer to the Fed's 2 percent target.
A forecast provided by Fed policymakers indicates that the unemployment rate is expected to slip below 5 percent in 2017. This suggests that unemployment would run below what economists call its "natural rate," in theory the lowest level the economy can sustain for the long run. Pushing unemployment below its natural rate could help lift inflation from its current ultra-low 1.3 percent level.
"A slight period of unemployment below natural rate will facilitate return of inflation to objective," Yellen said at a news conference after policymakers ended their December meeting.
