Running the economy hotter for longer could steepen Phillips curve

Tyler Atkinson and Ronald Mau

Dallas Fed Economics from Federal Reserve Bank of Dallas

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 (search for similar items in EconPapers)
Date: 2024-07-16
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