Powell On Tradeoff Between Inflation and Max Employment Goals

Q on the tradeoff between inflation and maximum employment goals.

• A: Powell: "This isn't the traditional Phillips Curve - the inflation we're seeing is not due to a tight labor market, it's due to shortages and strong demand meeting those. Not the classical situation where you have that tradeoff."
• Says that in the statement of longer-run goals [in language similar to that which he's employed previously], "when those two things are in tension, we take into account the employment shortfalls and inflation deviations, and the potential different time horizons in which employment and inflation are supposed to return to levels consistent with the mandate. We used to call it the "balanced approach paragraph." We have to think about the amount of deviation and the time it will take. We have to make policy in a world where the two goals are in tension. It's difficult. What is boils down to is common sense. It's risk management. We have to be aware of the risks, particularly the risk of significantly higher inflation. "