NAIRU

Nairu stands for Non Accelerating Inflation Rate of Unemployment. It is the rate of unemployment that the economy can have without the inflation rate increasing. In other words, it is the lowest unemployment rate possible without causing inflation. If the unemployment rate is above the Nairu, it means that inflation is decreasing. If the unemployment rate is below the Nairu, it means that inflation is increasing. The Nairu is important because it tells us the right balance between unemployment and inflation in the economy.