Broken Curves: Are Misguided Inflation Measures Leading to Policy Mistakes?

The Phillips curves in the UK and the U.S. are as flat as pancakes. Once a useful gauge for inflationary pressures in an economy, the curve has broken – it is flawed for the world that we live in today. 

First discovered by the London School of Economics (LSE) economist A.W. Phillips in 1958, the curve represents the long-term relationship between unemployment and inflation in an economy. The curve, an inverse but stable relationship between wage inflation and unemployment, implies that changes in the level of unemployment would have direct and predictable effects on wage inflation.