That inflation has remained low even as activity has picked up and the labor market has tightened has led a number of commentators to question the relevance of the Phillips curve analytical framework that ties inflation to the strength of the economy. In my view, it is premature to write off the Phillips curve.
The inflation-overshooting commitment introduced by the Bank of Japan last year is one answer, representing a response to the specific situation in Japan, but I strongly hope that scholars and policy makers will further deepen the debate from a global perspective. British scholars produced sharp insights into the importance of expectations in monetary policy nearly a century ago.