This difficulty of forecasting inflation has important implications, as we shall see. You may have noted that I did not include money growth in this list of inflation determinants. Ultimately, inflation is a monetary phenomenon, as suggested by Milton Friedman’s famous dictum.
However, no contradiction exists, as the expectational Phillips curve is fully consistent with inflation’s being determined by monetary forces in the long run. This point, originally made by Friedman himself, has been demonstrated in many textbooks and so I will not discuss it further here.