In both cases the outcome would push the Fed from that "golden path" onto a far more familiar one: An economy buckling as borrowing costs rise and confidence wanes.
"I don't think it is unavoidable" that joblessness will have to rise significantly for inflation to return to target, Dallas Fed President Lorie Logan said on Monday.
But the most important thing is that we stay focused on restoring price stability, and I think that will require some rebalancing in the labor market."
Her look at past periods of inflation and disinflation makes her think the labor market may still need a shock for the Fed to succeed.
"As nice as it is to see a really strong labor market, when you are trying to get inflation down, that's not your friend."
Persons:
Lorie Logan, Philip Jefferson, Austan Goolsbee, Jefferson, Christina Romer, Romer, Goolsbee, that's, Howard Schneider, Ann Saphir, Dan Burns, Paul Simao
Organizations:
DALLAS, Federal, National Association for Business Economics, Dallas, Chicago Fed, Treasury, University of California, White House's Council, Economic Advisers, Fed, Thomson
Locations:
U.S, Dallas, Israel, Palestinian, Berkeley