Inflation can be either demand driven or supply driven or import driven or even a combination of all three. At the moment it seems to be demand driven which means that in the absence of a contractionary fiscal policy (higher taxes and less government spending) higher interest rates will be coming. This will decrease demand and increase unemployment, which at the moment is still too low (below the natural rate of unemployment)
"The natural rate of unemployment is the level of unemployment that occurs when the labor market is in equilibrium and the economy is at full employment. It represents the unemployment rate that is consistent with stable inflation and is influenced by factors such as the structure of the labor market, wage rigidity, and the ability of workers to move between jobs. Key points include: It includes both frictional (temporary) and structural (permanent) unemployment. 2The natural rate is considered the lowest acceptable level of unemployment for a healthy economy. 1It is determined by various economic factors, including institutional features and the quality of education and skills. 2The natural rate is often estimated using the formula: Natural Unemployment Rate = [(FU + SU) / LF] x 100%, where FU is frictional unemployment, SU is structural unemployment, and LF is the labor force. 1Understanding the natural rate is crucial for policymakers as it helps in setting monetary policy and stabilizing the economy"
