For much of the past five years, the FOMC has been confronted with an obvious and substantial degree of slack in the labor market and significant risks of slipping into persistent below-target inflation. In such circumstances, the need for extraordinary accommodation is unambiguous, in my view.
However, with the economy getting closer to our objectives, the FOMC’s emphasis is naturally shifting to questions about the degree of remaining slack, how quickly that slack is likely to be taken up, and thereby to the question of under what conditions we should begin dialing back our extraordinary accommodation.