Fed’s Evans Struggling to Explain Phillips Curve Conundrum

There’s one key economic model that the Federal Reserve has struggled to understand, Charles Evans, the president of the Federal Reserve Bank of Chicago, told CNBC on Wednesday.”We don’t have a great understanding of why it’s gotten to be so flat,” Evans said about the so-called Phillips curve.This model states that as the unemployment rate decreases, inflation should pick up with more people in work. However, despite decreases in the U.S. unemployment rate, which currently stands at about 4 percent, the inflation rate has kept falling since the start of the year.It is the Fed’s main aim to stabilize prices at an inflation rate of about 2 percent. Recent data suggest that core inflation, which excludes food and energy, stood at 1.3 percent in September. At the start of the year, inflation was at 1.9 percent.

Source: The Federal Reserve doesn’t understand what’s happening to a key economic model, Fed’s Charles Evans says – CNBC

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.