Other things being equal, a lower longer-run level of the unemployment rate suggests that the economy has greater scope to create jobs without generating too much inflation.11 Thus, the downward revisions to FOMC participants’ views on the unemployment rate over the longer run contributed to our assessment that monetary policy could stay accommodative longer than we had anticipated in 2014.
The announcement of banks’ participation in the construction of a central platform for trading in credit default swaps is a step in this direction. The new platform will bring clarity in a market which, because of its size and opacity, is currently regarded as potentially capable of amplifying the crisis.