My friend, Jared Bernstein, laid out the case for a pause in the Fed's interest rate hikes at its meeting this month. I agree with pretty much everything Jared said, but want to push one point a bit further.

Jared raises the argument made by the more hawkish types that we have well-anchored inflationary expectations that we don't want to risk losing by allowing inflation to accelerate. This line is given as a rationale for hiking interest rates in a context where inflation even now is under the Fed's 2.0 percent target. And, this target is, of course, an average, meaning that to be consistent with the target we must have some periods with inflation above 2.0 percent.

Note how the threat we are supposed to fear has been pushed back. It is not actual inflation, that we are supposed to fear, or even potential inflation, which we have no reason to expect to jump in response to modest further reductions in the unemployment rate, it is now expectations that we should worry will become unanchored. This is getting pretty far removed from anything we see in the real world and very much into metaphysical land.

While there is nothing wrong with metaphysical speculation in many contexts, this is not one of them. We know that higher interest rates will slow the economy and keep people from getting jobs. The losers in this story are the most disadvantaged in society, blacks, Hispanics, people with less education, and others who face discrimination in the labor market.

To my view, the Fed has an absolute duty to push the unemployment rate as low as it can go until we see real evidence of inflationary pressures. Any honest economist has to admit we don't know what this level is. Just five years ago, the median estimate at the Fed was 5.4 percent. That clearly was wrong. I would have said something like 4.0 percent, but even this now looks too high. 

The unemployment rate looks likely to get still lower in the months ahead, probably crossing 3.5 percent and likely getting lower. Can it hit 3.0 percent? I don't know, but let's see what happens if we try. The potential benefits are enormous and the downsides are shall we say, speculative.