A terrific, important report from @JustinBloesch for @rooseveltinst. I agree with the bottom line and think an inflation target range of something like 2-3.5% makes sense for the asymmetric Phillips curve articulated in the paper plus would add the decline in the neutral rate.

I also am in rough agreement with @JustinBloesch view about the current path for monetary policy: keep tightening (but more gradually) if inflation is above 3.5% (or wages growing above 5%). Pause rate hikes otherwise.

Am less sure about looking through supply shocks. One can do that to some extent but I have three worries: 1. Becomes very asymmetric in practice. No central bank looks through positive supply shocks. 2. Can lead to self fulfilling inflation 4. Hard to tell supply from demand

And strongly disagree with using the employment-population ratio as a measure of full employment: 1. Too many structural influences. 2. Weak empirical link to inflation (see 2021). 3. Need openings & quits to assess tightness (see 2021).

But my uncertainties and disagreements are small and technical compared to my overall agreement with this excellent and important report.

P.S. I’m convinced that 2-2.5% or 3% or something is the right place to land. I’m still not sure we can land there given the credibility issues of shifting and risk of politicizing the target. But always good to know the best policy to be prepared in case it’s possible.