Inflation Dynamics and Sustainability
We expect the unemployment rate in 2020 to be 3½%—a percentage point below the NAIRU—and inflation 2¼%—¼ percentage point above its objective. I call this: “Missing on both mandates, but feeling goodâ€! It would be a remarkable outcome, if sustainable. By sustainable, we mean over a period of two or three years, not indefinitely. To be sustainable, there has to be over this period a tradeoff between inflation and the unemployment rate that is stable. But that would contradict the modern accelerationist version of the Phillips curve. A stable short-run tradeoff would be feasible if inflation expectations remained anchored at 2% ....
Led by former Federal Reserve Board Governor, Larry Meyer, Monetary Policy Analytics is an independent research firm focused on the macro economy, FOMC policy and interest rates. Our research is used by some of the world's largest hedge funds, fixed income asset managers, pension fund managers, currency desks, insurance companies and money center banks. The written commentary is outlined below:
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