This is also true in a number of advanced foreign economies, where declines in unemployment rates to low levels have failed to generate significant upward pressures on inflation. With the Phillips curve appearing to be a less reliable guidepost than it has been in the past, the anchoring role of inflation expectations remains critically important. Here, recent developments are mixed.
The May reading of the University of Michigan Surveys of Consumers’ measure of longer-term inflation expectations remained near its all-time low, while the New York Fed’s measure of three-year inflation expectations edged up in its latest reading to the highest level in more than a year.