Figure 2 Euro area HICP inflation and its persistence percent  Notes: Inflation persistence is estimated from a time-varying autoregressive model over a 30-quarter moving window for seasonally adjusted, quarter-on-quarter euro area headline inflation. The graph shows HICP inflation (in percent) together with the inflation persistence parameter. The vertical bar shows the start of the GFC. For details, see Bonam et al. (2019).
The million dollar question is then what these developments signal for central banks’ ability to control inflation. Let me explain my take on this issue. Notwithstanding the ongoing debate on its validity, I still regard the Phillips curve as a relevant analytical framework to structure our thinking.