Figure 3 shows that since January 2022, the Phillips curve is essentially vertical: The unemployment rate has hovered around 3.6 percent, and inflation has varied from 7 percent (in June) to 5.3 percent (in December). The recent experience raises the question: What happened to the Phillips curve that it is acting so differently now than in the pre-pandemic period?
Freshwater macroeconomists would once again argue that this difference shows the Phillips curve is a statistical anomaly and should not be used as a foundational element guiding monetary policy. Having grown up in the profession surrounded by freshwater macroeconomists, I am very sympathetic to this argument.