Journal Article

Explaining apparent changes in the Phillips curve: trend inflation isn't constant


Abstract: Monetary policymakers look to the Phillips curve?an expression of the relationship between inflation and the degree to which the economy is operating relative to its potential?for information about the cost of actions undertaken to lower inflation. Recent estimations of the curve suggest it is deviating from historical norms. We argue that changes in trend inflation and Fed operating procedures are not being taken into account in these estimations and that when they are, changes in the curve are minor and need not concern policymakers.

Keywords: Inflation (Finance); Phillips curve;

Authors

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Commentary

Publication Date: 2008

Issue: Jan

Order Number: 1