US may need 7.5% unemployment to curb inflation – Study

The new estimates from a team of researchers, including two staff economists from the International Monetary Fund (IMF), showed on Wednesday that the US unemployment rate needs to reach 7.5%, double its current level, to bring down raging inflation.

Key takeaways

“That would entail job losses of perhaps 6 million people, but the research found that only under “quite optimistic assumptions” about the behavior of the US job market and inflation would the US Federal Reserve be able to tame current price pressures with a smaller blow to employment.”

“If either the labor market doesn’t behave, or (inflation) expectations don’t behave, the small increase in unemployment the Fed projects won’t be enough. Either inflation will stay substantially higher, or we will have higher unemployment and a substantial economic slowdown.” 

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