The existence of a relationship between real growth and inflation has been investigated by economists for more than 200 years. In the decades after World War II, much of the profession came to view this relationship, represented by the Phillips curve, as describing a menu of choices for policymakers. Over the last 30 years, economists and policymakers have recognized the importance of time consistency and forward-looking expectations in monetary policy. Modern models of inflation suggest that the central bank's ability to manage the public's inflation expectations is essential to keeping inflation low and stable.

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