Adriana D Kugler: Navigating inflation waves - a Phillips Curve perspective
Text of the Whittington Lecture by Ms Adriana D Kugler, Member of the Board of Governors of the Federal Reserve System, at the McCourt School of Public Policy, Georgetown University, Washington DC, 20 February 2025.
The views expressed in this speech are those of the speaker and not the view of the BIS.
Thank you, Tom, and thank you for the invitation to give the Whittington Lecture. It is humbling to be here giving this lecture to honor the memory and legacy of Leslie Whittington. While I did not cross paths with Leslie here at Georgetown University, when I arrived, I heard so many stories about her contributions to the school, the university, and the students. She worked on research about the effects of economic policies on children and families, so I know that if I had had the good fortune to overlap with her as a colleague, I would have benefited greatly from her work and presence. It is also an honor to be giving this lecture, because so many dynamic leaders have previously stood before you, including some who have been inspirations to me in my career, such as Alice Rivlin and Cecilia Rouse.
Today I will be discussing a topic that has certainly captured the attention of central bankers, and the public at large, in recent years: inflation and the relationship between inflation and unemployment. But before I talk about a lens through which to think about the inflation experienced in the pandemic period, I want to update you with my views on the current outlook for the U.S. economy and the Federal Open Market Committee's (FOMC) efforts to sustainably return inflation to our 2 percent objective while maintaining a strong labor market.
Economic Outlook
The overall picture is that the U.S. economy remains on a firm footing, with output growing at a solid pace. Real gross domestic product grew 2.5 percent in 2024. Consumer spending continued to drive this solid pace last year. While retail sales posted a decline last month, January data are often difficult to interpret. Bad weather and seasonal adjustment difficulties may have affected the release, and it should be noted the slowdown came after a strong pace of sales in the second half of last year. That said, as usual, I pay attention to many indicators to gauge the state of the economy. Employment readings show that the labor market is healthy and stable. Payroll job gains have been solid recently, averaging 189,000 per month over the past four months, according to the Bureau of Labor Statistics (BLS). After touching 4.2 percent as recently as November, the unemployment rate has flattened to 4 percent since then, consistent with a labor market that is neither weakening nor showing signs of overheating.