It permits the Federal Reserve to support employment more aggressively during downturns--as was the case during and after the Great Recession--because a sustained inflation breakout is less likely when the Phillips curve is flatter. 5 However, a flatter Phillips curve also increases the cost, in terms of economic output, of reversing unwelcome increases in longer-run inflation expectations.
Thus, a flatter Phillips curve makes it all the more important that longer-run inflation expectations remain anchored at levels consistent with our 2 percent inflation objective.