Professor Philip Lane:

Exactly, and that is why it is important to act on one's risk assessment, rather than adopting a wait and see approach. In the United States, for example, the fall in unemployment to below 4% has been a welcome surprise and the Federal Reserve has started to raise rates. This will always be a balancing act but I fully agree with the Senator that one should not wait until it is too late. As to the risk of overheating, unemployment has declined to between 5% and 6% but I will not become too concerned about the labour market until it falls below 5%. Even then I will have an open mind. We are not there yet.