“However, in the years before the pandemic, the Fed repeatedly underestimated how low unemployment could go without sparking inflation.”
That’s backwards. Rather:
However, in the years before the pandemic, the Fed repeatedly underestimated how high inflation needed to go to achieve maximum employment (of all resources).
I am agreeing with your substantive point, the Fed correct to stimulate demand/reduce the EFFR, and indeed should have done so sooner.
"maximum employment -- the highest level of employment that does not cause inflation"
This is a mistaken way of putting it. Levels of employment do not cause inflation and disinflation; it's the other way around. The Fed causes inflation. labor market touches all sectors of the economy and it's state is non-exclusively informative of how close the economy is to full employment of all resources, to instantaneous maximum real income. But it is the inflation rate that achieves the latter that the Fed ought to be seeking not any one metric of the labor market.
“However, in the years before the pandemic, the Fed repeatedly underestimated how low unemployment could go without sparking inflation.”
That’s backwards. Rather:
However, in the years before the pandemic, the Fed repeatedly underestimated how high inflation needed to go to achieve maximum employment (of all resources).
I am agreeing with your substantive point, the Fed correct to stimulate demand/reduce the EFFR, and indeed should have done so sooner.
"maximum employment -- the highest level of employment that does not cause inflation"
This is a mistaken way of putting it. Levels of employment do not cause inflation and disinflation; it's the other way around. The Fed causes inflation. labor market touches all sectors of the economy and it's state is non-exclusively informative of how close the economy is to full employment of all resources, to instantaneous maximum real income. But it is the inflation rate that achieves the latter that the Fed ought to be seeking not any one metric of the labor market.