The big event of the week was Lockhart saying “I think there is a high bar right now to not acting, speaking for myself” on Tuesday.  In the WSJ interview, he revealed himself as a big Phillips curve believer (lower unemployment will eventually lead to higher inflation).  I’m not sa150810 Phillips curveying that couldn’t happen – but this is not your typical recovery and there are a lot of demographic and structural changes in the economy.  It’s been a while since my college economics classes so I just did a quick search on Wikipedia… “While there is a short run tradeoff between unemployment and inflation, it has not been observed in the long run.”  You don’t say!  A theory from 1958 isn’t really holding up in the long run!  And I’m pretty sure the relationship doesn’t even hold up in the short run[1] – it looks like we’ve had lower unemployment and lower inflation the past 18 months.  And as previously mentioned, there was a Fed paper a few months ago stating that there was little evidence that changes in labor costs have had a material effect on price inflation.  So to base one’s “confidence” in the inflation half of the dual mandate completing on increasing jobs leading to higher wages, leading to higher inflation (in the face of other contrary contractionary evidence) seems very thin.

[1] Data from