Renaud St-Cyr is a senior economist in the International Projection Division. In this role, he contributes to the production and communication of the Bank of Canada’s global macroeconomic outlook. Prior to joining the Bank, he worked as an economist for two years at the Department of Finance Canada. He completed his M.A. in Economics at Queen’s University.
The paper reviews evidence from the economic literature on the nature of the relationship between excess capacity and inflation, better known as the Phillips curve. In particular, we examine the linearity of this relationship. This is an important issue in the current economic context in which advanced economies are approaching or exceed their potential output.
Since the global financial crisis, core inflation has been persistently below target in most advanced economies. Recently, it has weakened further in several advanced economies despite gradually diminishing slack. This note reviews recent developments in core inflation across advanced economies and identifies distinctive patterns across regions.