Semi-annual Monetary Policy Report

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Reference no: EM13739998

In his Semi-annual Monetary Policy Report to the Congress of February 14, 2007, then Federal Reserve Chairman Ben Bernanke said: "Another significant factor influencing medium-term trends in inflation is the public's expectations of inflation. These expectations have an important bearing on whether transitory influences on prices, such as those created by changes in energy costs, become embedded in wage and price decisions and so leave a lasting imprint on the rate of inflation. It is encouraging that inflation expectations appear to have remained contained." What did Bernanke mean when he said that the public's expectations of inflation could "become embedded in wage and price decisions"? What would be the effect on the short-run Phillips curve of the public coming to expect a higher inflation rate?

Reference no: EM13739998

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