In Chart 1, panel a, the curve shifted. Inflation expectations weren’t anchored during that decade. Declines in demand didn’t translate into  -5lower inflation. Both unemployment and inflation increased because the Phillips curve shifted up and to the right. In panel b, we look at the curve during inflation targeting of 2%, from 1995 to today.
Just like the first part of the 1970s, we have seen declining unemployment and rising inflation. But, unlike the 1970s, long-term inflation expectations are currently well anchored at our 2% target. Our job is to use our monetary policy tools to maintain that anchor.