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 Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam