Kill the NAIRU

For decades economists have decreed that inflation can only be kept in check if the unemployment rate is above 5 per cent. This theory is now falling apart.

With any luck 2015 will finally see the death of the NAIRU, the acronym that has produced more misery in the past 50 years than any other.

It stands for the non-accelerating inflation rate of unemployment and refers to the idea that there is a level of unemployment below which wages and prices will start to rise, so that interest rates have to be hiked to get unemployment back up.

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