Two other regularities that I especially want to focus on today are the Phillips Curve and the trend growth in output. The latter regularities define limits - limits to the sustainable level of output, at any moment, and, once that level of capacity is reached, to the growth of output over time.
If these limits are exceeded, as typically happens during a cyclical expansion, the economy eventually overheats, inflation increases, and the expansion is undermined as policy is forced to rein in demand. Transitory influences, clearly among the stars of the current episode, feature a coincidence of favorable supply shocks that have restrained inflation.