Fed will be setting a threshold line for the anticipated rate of inflation and percent of unemployment in U.S, revealed a minute of Fed’s September meeting. After the launch of third round of stimulus via buying back of Mortgage Backed Securities (MBS) amounting $40 billion a month, Fed’s concern over inflation and unemployment at this point of time is indispensable, opines economists from around the world. With a meager annual growth rate of 1.3 percent as of second quarter, the executives of Federal Reserve are considering for additional policy measures to support the economic growth rate.

With strong supporting grounds, the core information disseminated off Fed’s minute was regarding the ‘additional policy accommodation’, which suggested that supplementary policy measures are mandatory for sustainable economic growth and improved labor conditions, as aspired by Fed. Some diplomats also suggest considering ‘trade-off’ between inflation and unemployment and argue that the state ought to let the rate of inflation go as high as 3 percent to pull down the unemployment rate to 7 percent or below. While others opine the task, shifting interest rate regime from existing guidance of maintaining interest at lower level by the mid of 2015, to be challenging and must be dealt with high consideration.

Fed’s minute briefly stated “several participants reiterated their concerns that additional purchase might complicate the committee’s effort to withdraw monetary policy accommodation when it eventually became appropriate to do so, raising the risk of undesirably high inflation in the future and potentially unmooring inflation expectations.” Despite the fear of sustained rise in general price level, analysts anticipate the rate of inflation to remain below the desired level of 2 percent for a foreseeable future.   

As the Federal Reserve will now be setting a line for inflation and unemployment, the threshold limit is expected to provide a brief guideline for further policy accommodation and exercising the stimulus more precisely, considering the incoming economic data and indicators in due course of time.