Central Banks, especially the Federal Reserve Bank, love to reference models to justify their rate decisions.

From a certain perspective, one can understand the Fed’s decision to continue using the Philips Curve, given their dual mandate of full employment and price stability; the Philips Curve is a model that includes both.

All three of these factors exert an increasing influence on both wages and employment levels in a way that is dynamic and asymmetric over time.

I’m not putting this out as new doctrine.

For my theory, I changed the perspective from evaluating the inverse relationship between unemployment and inflation, to evaluating the relationship between employment and inflation.

Step 1: “100%-U3 unemployment = Employment Rate” or ER.

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