crisis started. the healing in the labor market is likely to take some time. last month, a majority of federal open market committee ( fomc ) participants indicated they expect economic activity to decline notably this year and recover only gradually over the following two years. a majority of fomc participants indicated that they expect core inflation to remain below our 2 percent objective and employment to fall short of its maximum level at least through the end of 2022. looking ahead, it will be important for monetary policy to pivot from stabilization to accommodation by supporting a full recovery in employment and returning inflation to its 2 percent objective on a sustained basis. as we move to the next phase of monetary policy, we will be guided not only by the exigencies of the covid crisis, but also by our evolving understanding of the key longer - run features of the economy, so as to avoid the premature withdrawal of necessary support. because the long - run neutral rate of interest is quite low by historical standards, there is less room to cut the policy rate in order to cushion the economy from covid and other shocks. the likelihood that the policy rate is at the lower bound more frequently risks eroding expected and actual inflation, which could further compress the room to cut nominal - 9interest rates in a downward spiral. with underlying inflation running below 2 percent for many years and covid contributing to a further decline, it is important that monetary policy support inflation expectations that are consistent with inflation centered on 2 percent over time. and with inflation exhibiting low sensitivity to labor market tightness, policy should not preemptively withdraw support based on a historically steeper phillips curve that is not currently in evidence. instead, policy should seek to achieve employment outcomes with the kind of breadth and depth that were only achieved late in the previous recovery. 11 with the policy rate constrained by the effective lower bound, forward guidance constitutes a vital way to provide the necessary accommodation. for instance, research suggests that refraining from liftoff until inflation reaches 2 percent could lead to some modest temporary overshooting, which would help offset the previous underperformance. 12 balance sheet policies can help extend accommodation by more directly influencing the interest rates that are relevant for household and business borrowing and investment. forward guidance and asset purchases were road - tested in the previous crisis, so there is a high degree of familiarity with their use. given the downside risks to the outlook, there may come a time when it is helpful to reinforce the

, and risks are to the downside. the pace of improvement may slow if a large portion of the easiest gains from the lifting of mandated closures and easing of capacity constraints has already occurred. moreover, weekly covid case counts have been rising, and some states are ramping up restrictions. these developments mostly occurred after the reference period for the june employment report. after declining at a fast clip through early june, initial claims for unemployment insurance have moved roughly sideways in recent weeks and remained at a still elevated level of 1. 3 million in the week ending july 4. 5 some high - frequency indicators tracked by federal reserve the flattening out seen in recent weeks is even clearer when looking at nonseasonally adjusted claims numbers, which might be a slightly better measure than seasonally adjusted numbers in the current environment. the usual seasonal adjustment procedure, which relies on multiplicative seasonal factors, is not ideally suited to the current extraordinary circumstances. see jason bram and fatih karahan ( 2020 ), “ translating weekly jobless claims into monthly net job losses, ” federal reserve bank of new york, liberty street economics ( blog ), may 7, https : / / libertystreeteconomics. newyorkfed. org / 2020 / 05 / translating - weekly - jobless - claims - into - monthlynet - job - losses. html. in addition, the department of labor stated that 49 states reported about 1 million initial claims for pandemic unemployment assistance ( pua ) in the week ending july 4. however, since most pua applicants must first apply for, and be denied, regular state unemployment insurance ( ui ) benefits before they apply for pua, initial pua claims and initial claims for regular ui benefits will be strongly correlated ( likely with some lag ) and do not constitute independent measures of the number of unemployed persons seeking unemployment benefits. - 4board staff ( including mobility data and employment in small businesses ) suggest that the strong pace of improvement in may and the first half of june may not be sustained. the pandemic ’ s harm to lives and livelihoods is falling disproportionately on black and hispanic families. after finally seeing welcome progress narrowing the gaps in labor market outcomes by race and ethnicity in the late stage of the previous recovery, the covid shock is inflicting a disproportionate share of job losses on african american and hispanic workers. according to the current population survey, the number of employed persons fell