[TE Summary] Jun 15th 2017 Finding Phillips - Inflation has not yet followed lower unemployment in America
Finding Phillips
Inflation has not yet followed lower unemployment in America
But economists and the Federal Reserve are not about to abandon the Philips curve
http://www.economist.com/news/finance-and-economics/21723422-economists-and-federal-reserve-are-not-about-abandon-phillips
Print Edition, Finance and economics, June 15th 2017, Washington, DC
1. The reason why the Fed raised the rate to 1-1.25% can be explained by a theory that goes, "that central banks cannot endlessly reduce unemployment without sparking inflation is economic gospel."
2. Fed justified the raising pointing out the unemployment rate is below the "natural" rate, but is the Phillips curve explaining the inverse relationship between unemployment and inflation still a valid theory?
3. Although some economists this to an increased level of natural unemployment rate, in October 2009, underlying inflation was 1.3%, only a little lower than now even when the unemployment rate peaked.
4. The Fed has constantly lowered its "natural" rate undermining its own justification.
5. Three reasons why economists cannot abandon the Phillips curve: First, the effect of unemployment on inflation can get lost amid an economic gyration.
6. Second, inflation can take off sharply when the unemployment rate gets too low.
7. Last, the emphasis on inflation expectations. Those have sagged while the unemployment rate got lower.
Words and expression
1. Phillips curve: a supposed inverse relationship between the level of unemployment and the rate of inflation
2. gyration: a rapid movement in a circle or spiral, a whirling motion
3. sag: sink, subside, or bulge downward under weight or pressure or through lack of strength
4. exonerate: (especially of an official body) absolve (someone) from blame for a fault or wrongdoing, especially after due consideration of the case
5. call into question: to cause doubts about something
6. take a dive: pretend to be knocked out
Permalink
http://eoesociety.blogspot.com/2017/06/te-article-summary-jun-15th-
Inflation has not yet followed lower unemployment in America
But economists and the Federal Reserve are not about to abandon the Philips curve
http://www.economist.com/news/finance-and-economics/21723422-economists-and-federal-reserve-are-not-about-abandon-phillips
Print Edition, Finance and economics, June 15th 2017, Washington, DC
1. The reason why the Fed raised the rate to 1-1.25% can be explained by a theory that goes, "that central banks cannot endlessly reduce unemployment without sparking inflation is economic gospel."
2. Fed justified the raising pointing out the unemployment rate is below the "natural" rate, but is the Phillips curve explaining the inverse relationship between unemployment and inflation still a valid theory?
3. Although some economists this to an increased level of natural unemployment rate, in October 2009, underlying inflation was 1.3%, only a little lower than now even when the unemployment rate peaked.
4. The Fed has constantly lowered its "natural" rate undermining its own justification.
5. Three reasons why economists cannot abandon the Phillips curve: First, the effect of unemployment on inflation can get lost amid an economic gyration.
6. Second, inflation can take off sharply when the unemployment rate gets too low.
7. Last, the emphasis on inflation expectations. Those have sagged while the unemployment rate got lower.
Words and expression
1. Phillips curve: a supposed inverse relationship between the level of unemployment and the rate of inflation
2. gyration: a rapid movement in a circle or spiral, a whirling motion
3. sag: sink, subside, or bulge downward under weight or pressure or through lack of strength
4. exonerate: (especially of an official body) absolve (someone) from blame for a fault or wrongdoing, especially after due consideration of the case
5. call into question: to cause doubts about something
6. take a dive: pretend to be knocked out
Permalink
http://eoesociety.blogspot.com/2017/06/te-article-summary-jun-15th-
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