Targeting the Natural Rate of Unemployment? Because the natural rate of unemployment is the economists’ notion of what constitutes “full employment,” it might seem logical for the Fed to use monetary...

Targeting the Natural Rate of Unemployment? Because the natural rate of unemployment is the economists’ notion of what constitutes “full employment,” it might seem logical for the Fed to use monetary policy to move unemployment toward its natural rate. However, many economists believe such a policy would be unwise because the natural rate may shift over time and policymakers may misjudge the correct rate. What would happen if the Fed targeted a 5 percent unemployment rate but the true natural rate were 6 percent?