[33] These effects are reinforced by the structural shift towards services, which tend to be, on average, less responsive to monetary policy than more capital-intensive sectors, such as manufacturing. [34] The second reason why a de-anchoring of inflation expectations has become more costly relates to the slope of the Phillips curve.
There is a wealth of studies that find that the Phillips curve has become flatter over the past few decades. [35] Before the pandemic, a flat Phillips curve meant that central banks could allow the economy to run hot before inflationary pressures would emerge.