Monetary policy should respond to changes in unemployment caused by structural factors like changes in job matching efficiency and labor force size. When these factors decrease, inflation goes up, requiring an increase in interest rates. However, the natural interest rate decreases in response to these shocks. The best policy is to slightly deviate from price stability and lower interest rates to match the natural rate of interest. Structural changes in the labor market may have led to the recent drop in the natural interest rate in the US.