Phillips Curve bites the dust

Week ending Friday September 22nd 2017 The FOMC meeting dominated the week. Although the market felt that policy had been tightened a little more than expected as bond yields and the USD rose, it wasn’t a big deal. Equities were flat. The bigger story was really quite dovish for monetary policy. As well as lowering the “normalized” interest rate level Janet Yellen revealed doubts about the Phillips Curve. Inflation wasn’t picking up as theorised by the Fed orthodoxy and, for once, transitory factors weren’t blamed. Perhaps “our understanding of the forces driving inflation is imperfect”, she admitted. And if the…

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