But, to build confidence in this result, we would like to be able to tell a qualitative story that explains why NAIRU may have declined and find evidence in labor markets, beyond the time varying parameter estimates of NAIRU, that is consistent with it. The source of the decline in NAIRU will, hopefully, help us to answer a very important related question.
In December, the Committee reduced its target further, setting a range of 0 to 25 basis points for the target federal funds rate. The Fed's monetary easing has been reflected in significant declines in a number of lending rates, especially shorter-term rates, thus offsetting to some degree the effects of the financial turmoil on the cost of credit.