Alice RIvlin in a speech before the Economc Policy Conference:  I want to draw your attention today to what I perceive as a cultural lag in thinking about the objectives of economic policy. Why are we still so focused on fighting inflation? Why are so many people in this room devoting so much time and attention to guessing when the Federal Reserve will start raising short-term interest rates and get back to its “normal” job of protecting us from inflation? Is inflation an important threat to our economic well-being? Is when to raise interest rates the most urgent question facing the Fed at the moment? Or are we suffering from cultural lag?

Central banks have amply proved that they know how to stop inflation—Paul Volcker showed that. They have been much less successful in getting little inflation going.

Does the new normal for which current tools of monetary, fiscal, and regulatory policy need to be restructured? In the Volcker era of central banking, inflation was the principal threat to sustainable growth—and central bankers had to be brave enough to raise interest rates to tame the beast and steadfast in communicating their determination to do so. Paul Volcker demonstrated that he was a brave man.

But after Volcker slayed the dragon over three decades ago, inflation gradually drifted down, and the beast has hardly wiggled its tail for a long time. The last time the core PCE hit 3.0 percent was 1992. The surprise of the second half of the 1990s was the co-existence of strong job growth, low unemployment—with the unemployment rate even dipping briefly below four percent—and no worrisome rise in inflation. The surprise of the current long recovery is that, even with decent economic growth and persistently impressive job creation, we still have wages barely budging and inflation below two percent and recently falling. Just possibly, destructive inflation is an oh-so-last-century threat that should be moved down our list of macro-economic concerns to make room for others. In any case, it is threat we know how to deal with, so we should focus on the ones for which we are less equipped.  Is inflation irrelevant