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Running the economy hotter for longer could steepen Phillips curve
Abstract: In the short run, running the economy hot—with output growth above potential—comes with the cost of additional inflation. But policymakers cannot exploit this relationship forever because inflation expectations won’t remain anchored, as the public comes to expect a higher level of inflation for any given level of output.
Keywords: monetary policy; inflation; forecasting; Phillips curve;
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https://www.dallasfed.org/research/economics/2024/0716
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Provider: Federal Reserve Bank of Dallas
Source: Dallas Fed Economics
Publication Date: 2024-07-16