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On Thursday, February 29, Austan Goolsbee joined Markus’ Academy for a conversation on, “Monetary Policy at an Unusual Time.” Austan Goolsbee is president and chief executive officer of the Federal Reserve Bank of Chicago.

A summary in three bullets
- In 2023 we saw a virtually unprecedented decline in inflation without an associated recession. In a Phillips curve framework, 2023 saw one of the largest ever drops in inflation in a year, yet unemployment remained below the natural rate.
- To understand why, we must consider the time it takes for the transmission of shocks to filter through to the economy. Supply chain shocks (repairs) take a while to work into inflation (disinflation), while it took until 2022 for the post-covid negative labor supply shock to contribute to inflation. We must also give credit to the higher than expected growth in productivity.
- In contrast to the 80s, after covid the world believed the Fed would remain steadfast to combat inflation. By anchoring inflation expectations, this was fundamental for pulling off the “golden path.” Thanks to Paul Volcker this time the Fed didn't have to fight the second dragon of getting inflation expectations back down.

[0:00] Markus’ introduction and poll questions
[8:06] The Golden Path and Inflation Dynamics: (1) Supply chains and (2) the labor market
[26:01] The Golden Path and Inflation Dynamics: (3) Puzzles in housing inflation and (4) productivity growth
[54:25] A note on non-bank financial institutions
[59:18] This time, ending on a cautious note