The Fed found in the 1970s that this upward drift could only be retarded by large medium- and long-term employment losses. Thus, I view the basic unemployment-inflation trade-off in the making of monetary policy as really being about short-term employment gains and the risk of larger longer-term employment losses.
As we said last month, while the economy is likely to require less monetary stimulus over time, we will be cautious in making future adjustments to our policy rate. In particular, the Bank will be guided by incoming data to assess the evolution of economic capacity, the dynamics of both wage growth and inflation, and the sensitivity of the economy to higher interest rates.