Bill Phillips, whose eponymous curve had been thoroughly roughed up by Milton Friedman by the time I studied it, was far more interesting than the relationship between unemployment and inflation which made him famous fairly well-known.

Or at least so his Wikipedia entry suggests. Personally, I wonder about how 'secret' his prisoner-of-war camp kettle really was. But anyone with the stories (crocodile hunter?) he surely had deserves much slack. All in all, it is somewhat bizarre that it is but the "Phillips Curve" for which he is principally remembered:



And so it is the San Francisco Fed has put together another of its informative, if not lively, Economic Letters called Inflation: mind the gap (from which the above chart). It fits topically into the current, broader, inflation versus deflation debate.

The broad conclusion is that the Phillips Curve would have worked pretty well since 2007 (disruptive economic times suit it, apparently) and, moreover, it suggests inflation will continue to fall - assuming continuing stubbornly high unemployment.

Couple of elephants watching this from armchairs. The Federal Reserve's balance sheet expansion; and (some may struggle to recall this bit) the vaporisation of financial assets over the last 30 (minus the recent 10) months. Or has the letter puts it:

"Our evidence does not imply that inflation cannot run up as long as unemployment remains low. Other factors determine inflation beside the unemployment gap. This is an important and painful lesson that we have learned from the experience of the 1970s. For example, supply shocks and commodity price increases can push inflation up."

Nice examples.

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