Inflation dynamics

This paper first outlines the key stylized facts about changes in inflation dynamics in recent years: (1) inflation persistence has declined, (2) the Phillips-curve has flattened and (3) inflation has become less responsive to other shocks. These changes in inflation dynamics are interpreted as resulting from an anchoring of inflation expectations as a result of better monetary policy. The paper then goes on to draw implications for monetary policy from this interpretation, as well as implications for inflation forecasts.