While the extreme case of a flat Phillips curve is more expositional than real, it may be the case that deviations from the 2% CPI inflation target will be harder to close, in the sense of requiring larger policy changes and larger movements in economic slack, as measured by unemployment and the output gap.
Experience with the floating rate system Needless to say, experience under the floating rate system has not been problem-free. Events did not unfold quite as its proponents had suggested, and the past 25 years have been characterized by volatile short-term movements and sizable long-term swings in most of the major currencies.