Phillips Curve Ahead
A classic inflation model still applies in the New Economy
The link between unemployment and inflation remains. But the level at which dropping unemployment triggers inflation may be lower than it has been in the past.
Inflation seems dead now. But it can take a long time, a year or more, for lower unemployment levels to translate into faster inflation.
Huge investments in technology are netting productivity increases and extending the economic cycle. But the U.S. economy is also enjoying some temporary windfalls, ranging from falling oil prices to slower growth in benefit costs.
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Updated July 17, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.