Top central bankers admit inflation models fell short

Reliance on Phillips curve and demand-driven models may have created blind spots

ECB Sintra 2022 policy panel
From left: Andrew Bailey, Agustín Carstens, Christine Lagarde, Jerome Powell and Francine Lacqua
ECB/Sérgio Garcia

The analytical tools central banks use to understand inflation contain flaws that may have limited their usefulness in tracking surging prices over the past year, senior officials said today (June 29).

Jerome Powell, chair of the US Federal Reserve, said the Phillips curve that sits at the heart of many central bank models was “just not capable” of producing high inflation predictions.

“I think we now understand better how little we understand about inflation,” Powell said, speaking at the

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