Over the past decade, the ECB, like other central banks, has taken unprecedented measures to limit the impact of the financial crisis on the economy of the euro area. Supported by these measures, economic conditions improved. Unemployment has gone down and confidence, up. Economic indicators are solid and the most oft-used measures of slack are closing; and yet – inflation has remained subdued.
Over the past year, the FOMC has communicated through its statements that it perceives the current unemployment rate to be elevated relative to levels that it views as consistent with its dual mandate. In this situation, there is a trade-off involved in the making of monetary policy. On the one hand, adding monetary accommodation reduces unemployment.