Simone Lenzu argues in Liberty Street Economics that costs shape the Phillips curve

Simone Lenzu argues in Liberty Street Economics that costs shape the Phillips curve

Simone Lenzu’s post was published on February 4, 2026. Lenzu argues that the Phillips curve is steep when inflation is related to firms’ real marginal costs, although it appears flat when related to output or unemployment gaps. The curve describes how inflation responds to economic conditions; Lenzu says firms’ costs connect more directly to pricing decisions than those measures of economic slack. In coauthored research, Lenzu and colleagues use firm-level price and cost data to estimate the cost-based curve. Lenzu attributes weaker cost pass-through to infrequent price changes and firms’ strategic choices to move with competitors. For Belgian manufacturing, the post reports that a model using production costs tracks producer price inflation and that costs account for much of its fluctuations. Lenzu argues that a flat output-based curve need not mean costs have little influence: output gaps may be a poor proxy for marginal costs. The post says this relationship can change under stress: pandemic-era shocks raised costs, while more frequent price adjustments increased inflation’s responsiveness to costs and generated nonlinear dynamics. Lenzu’s conclusion is that the curve’s slope depends on the measure used and can change as firms’ pricing conditions change. The extent to which these findings apply beyond the Belgian manufacturing example remains unknown.

Publication: 9ffa7252-e788-1aae-bf2a-b218f3e1e98b

attribution — pass: The reading attributes the argument to Simone Lenzu, writing on the New York Fed's Liberty Street Economics blog, and credits the research to Lenzu and coauthors. The source is a single authored post, not a listing. The reading also correctly sets aside the reader comments.

In this post, I present evidence from coauthored research showing that, contrary to the conventional view, the Phillips curve is alive and steep

summary — pass: The reading leads with Lenzu's thesis: the curve is steep when tied to real marginal cost but looks flat when tied to output or unemployment gaps. It explains the Phillips curve in plain language, and marginal cost is defined beside the reading. It also covers the frictions, the Belgian example, the reconciliation argument and the post-pandemic change. The closing 'conclusion' sentence slightly softens the post's 'alive and steep' force, but the summary states steepness elsewhere, so this is not material. The question about why firms now adjust prices more often follows from the source, which defers that topic to a companion post.

the Phillips curve is alive and steep, and it captures inflation volatility remarkably well once real marginal cost is used

date — pass: The reading's date of February 4, 2026 matches originalPublished and the post's own dateline at day precision. The page was modified on 2026-02-05, but the claims rely on the article body, not on later additions. The reading neither uses nor relies on the comments or related-post links. The evidence is a publisher page, so no archive disclosure is needed. Forecast-like material, such as the companion post, is not presented as an outcome.

February 4, 2026 Anatomy (not Autopsy) of the Phillips Curve

support — pass: Each claim matches its excerpt: the steep cost-based curve, the firm microdata, the pricing frictions, the slope three to ten times larger, about 70 percent of Belgian manufacturing inflation fluctuations, the weak output-cost link, and more frequent recent price changes. Saying generalization beyond Belgian manufacturing is unknown fits the source's case-study framing. The reading adds no unsupported benefits or costs.

Using the Belgian manufacturing sector as a case study, we construct a model-generated inflation series by feeding data on costs into the Phillips curve.

media — pass: No media is selected and no verified media candidates are supplied, so there is no identity or relevance problem.