from the Congressional Budget Office
Since the late 1990s, aggregate inflation has been less sensitive to changes in economic conditions than it has in previous decades. Analysis using the Phillips curve model at the component level shows that cyclical sensitivity of inflation varies substantially for different types of goods and services.
In particular, inflation for most service components (such as shelter) and food has remained largely “pro-cyclical” (that is, rising during economic expansions and falling during economic contractions), but inflation for many types of goods (such as motor vehicles) has not. The lack of cyclical sensitivity in price inflation for goods helps explain the decreased cyclical sensitivity of aggregate inflation over the past two decades.
Also during that period, inflation expectations have become more anchored and less dependent on past inflation. Analysis using the Phillips curve model with 10 different measures of aggregate inflation suggests that that process is probably incomplete. In particular, both past inflation and the constant term in the Phillips curve model appear to help explain the dynamics of inflation through the lens of that model.
Inflation and the Phillips Curve from Congressional Budget Office
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