An Evolution of Inflation Expectations: Understanding Price Stability and the Phillips Curve
What do price stability and the Phillips curve have to do with inflation expectations?
One part of the Fed's dual Congressional mandate is to promote price stability, and a moderate, stable, and positive rate of inflation is consistent with this mandate. Economists have used the Phillips curve to view the inverse relationship between price inflation and unemployment since the late 1950s.
But has this relationship weakened? Do policymakers in the U.S. still need to consider trading higher unemployment for lower inflation? Read about what Fed Chair Powell has recently said about inflation and what the Fed's actions are for achieving stable prices in this Page One Economics special issue.