Ann Owen, the Henry Platt Bristol Professor of Economics, was interviewed by National Public Radio reporter John Ydstie for a segment on All Things Considered titled Is It Time For The Fed To Say Goodbye To The Phillips Curve Theory? on Oct. 29. As Ydstie explained, “For many years, the Phillips curve accurately predicted that when the unemployment rate was low, inflation heated up. But these days, jobs are very plentiful, yet inflation remains very low.”
Owen replied that whether the Phillips curve is dead or just resting, its long slumber has been useful for the Federal Reserve. The U.S. economy's extended period of stable inflation and falling unemployment has allowed the Fed to raise interest rates gradually and to pause after every rate hike to see how the economy responds.
“If you ask the Fed - do you want low and stable inflation, or do you want really rapid inflation because that would confirm your belief about how the economy works? - I have to believe that most of the people at the Fed would say, give me low and stable inflation,” Owen concluded.