As a consequence, the level of external demand for our products in advanced economies remains weak. That said, in recent months, the considerable external headwinds have abated somewhat. European bank funding and sovereign debt markets have stabilized, global financial conditions have improved and risk aversion has decreased. This creates a window for European authorities to address the deep structural issues in their monetary union.
As the figure makes clear, a multiyear period with unemployment below 4 percent and stable inflation would, if realized, be unique in modern U.S. data. 5 To understand the basis for these forecasts, it is useful to contrast two very different periods included in figure 1: From 1960 to 1985, and the period from 1995 to today.