Fed probing for full employment

The Fed’s objectives for the economy have become less dovish — or more hawkish — as the economy has approached what the Fed takes to be full employment. At this point, the central bank is still willing to tolerate slightly above-trend growth, because “full employment” has not yet been confirmed by a recovery of underlying inflation towards the 2% target.  However, that confirmation may be coming. And its arrival would create a greater sense of urgency around containing growth to potential and preventing a further tightening of the labor market. In the meantime, there is no need to be distracted by the balance sheet run-off, the idea that the Fed will fight an equity bubble, or even the rates forecasts.  FH-171011