The chapter discusses the concept of the natural unemployment rate and its implications for inflation and economic stability. It challenges the standard model of the natural rate, arguing that downward nominal wage rigidity in an economy with stochastic demand shocks can lead to a non-unique natural unemployment rate. The authors present empirical evidence showing that nominal wage cuts are rare, except under extreme financial strain, and use a formal model to demonstrate that maintaining zero inflation can significantly increase the sustainable unemployment rate and reduce output. They also develop a stochastic simulation and a time-series model to illustrate the economic costs of targeting zero inflation. The chapter concludes by emphasizing the importance of downward wage rigidity and its impact on employment and output, suggesting that policies aimed at zero inflation may impose permanent real costs on the economy.The chapter discusses the concept of the natural unemployment rate and its implications for inflation and economic stability. It challenges the standard model of the natural rate, arguing that downward nominal wage rigidity in an economy with stochastic demand shocks can lead to a non-unique natural unemployment rate. The authors present empirical evidence showing that nominal wage cuts are rare, except under extreme financial strain, and use a formal model to demonstrate that maintaining zero inflation can significantly increase the sustainable unemployment rate and reduce output. They also develop a stochastic simulation and a time-series model to illustrate the economic costs of targeting zero inflation. The chapter concludes by emphasizing the importance of downward wage rigidity and its impact on employment and output, suggesting that policies aimed at zero inflation may impose permanent real costs on the economy.