John Taylor has worked out a simple way of thinking about this question. Under what is known as the Taylor Rule, monetary authorities first determine an equilibrium level of a target interest rate, say the real federal funds rate.
But we are mindful that, as we approach that figure, there's a risk we find there is more room to come down before wage growth picks up in earnest. How Much (and How Quickly) Will Wage Growth and Inflation Pick Up? Whatever judgement one might make about the extent of spare capacity, it is clear that both here and overseas, it is being absorbed.