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Press Release

Reports of the Phillips curve’s death are exaggerated, according to a new Cleveland Fed study

According to the Cleveland Fed’s latest economic commentary, Cyclical versus Acyclical Inflation: A Deeper Dive, reports of the Phillips curve’s death are exaggerated. Cleveland Fed researcher Saeed Zaman builds on recent research separating the components of overall inflation into cyclical and acyclical categories, but does so at a finer level of disaggregation than previous analyses to understand recent inflation developments in the two categories.

Zaman finds that the inflation rate among cyclically sensitive subcomponents—those which are relatively responsive to economic conditions and which comprise roughly 40 percent of overall core PCE inflation—has generally continued to firm in recent years. This firming is commensurate with a strengthening labor market that has returned the cyclical-category inflation rate to near pre-Great Recession levels. By contrast, the inflation rate among the acyclical subcomponents remains subdued.

“The analysis shows the Phillips curve relationship continues to be alive and well for categories of goods and services that have historically been responsive to overall labor market conditions,” Zaman says. “While the results based on higher-level aggregates point to a recent step down in cyclically sensitive inflation, I find that a measure of cyclically sensitive inflation based on highly disaggregated data has continued on a firming trend in recent years in line with a strengthening labor market.”

A modest firming in acyclical core PCE inflation to a more normal level, combined with ongoing strength in the labor market, would be enough to return core PCE inflation to 2 percent within approximately one year, Zaman finds.

Read more: Cyclical versus Acyclical Inflation: A Deeper Dive

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell,, 513.218.1892