Rare is the leader of a monetary policy committee who relishes going to the legislature and reporting that the central bank is concerned that too many people have jobs. The uncertainty about the threshold unemployment rate also suggests a differing degree of intensity in the response of monetary policy to deviations of inflation and output to their respective targets.
That uncertainty derives from our inability to precisely pin down two key parameters – the threshold unemployment rate and the trend rate of growth in potential output. As a result, there is a subtle difference between the two objectives in the dual mandate.