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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