Lowering unemployment threshold under discussion at Fed

|By:, SA News Editor

"Fed officials have been discussing for several months whether to lower the unemployment threshold as a way to convince markets that they will keep short-term interest rates low for a long time," writes Jon Hilsenrath, joining the chatter begun yesterday by Goldman's Jan Hatzius, who suggests the Fed is set to lower to 6% from 6.5% the unemployment rate threshold at which it would begin hiking the Fed Funds rate.

Hilsenrath also refers to a recent Fed research paper positing unemployment would fall faster if the central bank promised to keep rates near zero for longer.

The San Francisco Fed's John Williams is skeptical, telling an audience a lower threshold wouldn't tell anybody anything they don't already know.

Treasurys (TLT -0.2%) seem to like the idea, the 10-year yield falling 3 bps to 2.64%.

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