The Fed Abandons the Idea Low Unemployment Stokes Inflation The long-held view is that we can’t have a tight labor market without wage growth and rising prices. This relationship encourages central bankers to hike interest rates in the expectation that inflation will appear with labor market strength.

But today’s Phillips Curve is flat because wage growth is weak.

a. Evaluate the claim that the Phillips curve has gone flat.

b. How does the Phillips curve model account for the facts reported in the news clip?