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Weekly Wrap

What it will take to get a 6.5% unemployment rate

Kai Ryssdal Dec 14, 2012
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Weekly Wrap

What it will take to get a 6.5% unemployment rate

Kai Ryssdal Dec 14, 2012
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The major business news this week came from the Federal Reserve’s meeting, and Chairman Ben Bernanke’s announcement that the Fed will keep interest rates at-or-near zero until unemployment rates drop to 6.5 percent. It’s the first time the central bank has put a number on its policy decisions.

But what will it take to get to that 6.5 percent rate? The Weekly Wrap will take a look later on today’s show.

In the meantime, here are what our guests this week suggest for your reading list this weekend. The New York Times’ Catherine Rampell recommends:

And Reuters finance blogger Felix Salmon suggests these longreads:


Our Weekly Wrappers weren’t surprised by the Federal Reserve’s 6.5 percent announcement.

“I think it makes a lot of sense,” says Rampell. “And actually, the Fed did not really change its projection on when it would be lowering rates in terms of year-terms. When we get down to 6.5 percent is about where we would be when the Fed said they would be lowering rates back under the old regime. And one advantage of using this system where they peg it to a number, as opposed to a year, is that they don’t have to keep on pushing out their estimate for how long it’s going to be when they…tighten monetary policy, which could be bad for confidence.”

Some are forecasting that the 6.5 percent rate could come around in 2014. But Salmon says it’ll be difficult to tell.

“One of the problems is that we really have no idea — the headline unemployment rate is a very fuzzy number,” says Salmon. “We’re not having a hard 6.5 percent…target. They’re just saying ‘We want unemployment to come down to something vaguely tolerable.’ And that’s what 6.5 percent is.”

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