Although the past two monthly readings of core inflation have been held down in part by idiosyncratic factors, including upgrades to cell-phone plans, the apparent lack of progress in moving core inflation back to 2 percent is a source of concern.
Traditionally, economists assessed that as labor market slack diminished and the economy approached full employment, upward pressure on inflation would result, in the statistical relationship known as the Phillips curve. But I am not confident we can count on the Phillips curve to restore inflation to target in today’s economy.