It used to be that unemployment rates were a seen as a direct and prominent influencer of inflation, where traditional economic thought emphasized the inverse relationship between unemployment and inflation rates.
Now, there seems to be a new man on the block- the expectation of inflation (based on past inflation rates) seems to be a primary determiner of inflation, seemingly reducing the sway that unemployment rates have.
It is not that unemployment rates are insignificant, just that a bigger change is needed to have the same historical effect on inflation rates. Even Ben Bernanke, backed by the Fed economists seem to embrace this new way of thinking.
This evolving change takes the power of expectation to a whole new level…
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