Federal Reserve Bank of New York · Feb 5, 2026
Simone Lenzu argues in Liberty Street Economics that large cost shocks steepen the Phillips curve
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Simone Lenzu’s post was published on February 5, 2026. Lenzu argues that inflation responds more than proportionally when cost shocks become large, because more firms adjust prices and do so more often. In Belgian manufacturing data, the relationship between costs and producer price inflation steepens once annual cost increases exceed a threshold; Lenzu says the same pattern appeared during energy shocks and supply-chain disruptions associated with the COVID-19 pandemic and the war in Ukraine. Firm-level data help explain the mechanism: firms are more likely to reprice when their prices drift far from their desired prices, and large aggregate shocks shift the distribution of those price gaps. Lenzu contrasts this state-dependent pricing with the Calvo model, in which the probability of price adjustment is fixed. The evidence suggests why that model can fit normal times yet miss pricing behavior during major disturbances. Lenzu concludes that recognizing shifts between these regimes matters to decision makers seeking timely signals about inflation, and to understanding how inflation builds and eventually unwinds. The post’s evidence comes from Belgian manufacturing; how well its findings apply to other sectors or economies remains unknown.
Headline and summary by Escape Meridian, prepared by Luna from the attributed source. A source check is not independent confirmation of the source’s claims.
Original source
Federal Reserve Bank of New York · Article
Source details
Original source date: Feb 5, 2026 (2026-02-05T12:00:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-08T08:53:23.681Z. First observed: 2026-10-30T13:24:10.516Z. Retrieved: 2026-10-30T13:25:46.010Z.
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Limits
Text as retrieved on October 30, 2026; originally published February 5, 2026. The post’s empirical evidence discussed here is from Belgian manufacturing; the evidence does not establish how well the findings apply to other sectors or economies. The post states that its views are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System.
Open question
How well do these Belgian manufacturing findings apply to other sectors or economies?
Source-stated
Lenzu argues that inflation becomes more sensitive to cost shocks once they are sufficiently large.
Once cost shocks exceed a threshold—around a 20 percent annual increase in our data—the slope steepens sharply.
Source-stated
Lenzu says firms reprice more often when price gaps are large, helping explain nonlinear inflation responses.
Firms in the tails—those with prices far above or below their desired price level—change prices much more often.
Source-stated
Lenzu argues that recognizing shifts between pricing regimes matters for inflation analysis and timely signals.
Recognizing when the economy shifts between these regimes is important for decision makers who rely on timely signals about changing inflation conditions.
Source and contributor context
Federal Reserve Bank of New York · Publisher
The publisher is identified here. No individual author has been inferred.
Source media
Media retrieval status: unchecked.
Terms and references
Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement.
Editorial provenance
Version 1. Publication ID: 33a515dd-9b64-68c3-100d-96f0bf76f052.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: uncertain by anthropic/claude-opus-5.5 on 2026-11-08T08:49:14.726Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: ffbe05a064c63a41c0fb66b9153d8b588889d1c03e11a820d2329aac4d2d2b12. Source text hash: ddc458479ff156db2765db73446fc01dc70f0e7ad64fbb9fdb342bed70a17e2f.
Revision and source-check history
Version 1 · 2026-11-08T08:53:23.681Z
Simone Lenzu argues in Liberty Street Economics that large cost shocks steepen the Phillips curve
Simone Lenzu’s post was published on February 5, 2026. Lenzu argues that inflation responds more than proportionally when cost shocks become large, because more firms adjust prices and do so more often. In Belgian manufacturing data, the relationship between costs and producer price inflation steepens once annual cost increases exceed a threshold; Lenzu says the same pattern appeared during energy shocks and supply-chain disruptions associated with the COVID-19 pandemic and the war in Ukraine. Firm-level data help explain the mechanism: firms are more likely to reprice when their prices drift far from their desired prices, and large aggregate shocks shift the distribution of those price gaps. Lenzu contrasts this state-dependent pricing with the Calvo model, in which the probability of price adjustment is fixed. The evidence suggests why that model can fit normal times yet miss pricing behavior during major disturbances. Lenzu concludes that recognizing shifts between these regimes matters to decision makers seeking timely signals about inflation, and to understanding how inflation builds and eventually unwinds. The post’s evidence comes from Belgian manufacturing; how well its findings apply to other sectors or economies remains unknown.
Original source
Federal Reserve Bank of New York · Article
Source details
Original source date: Feb 5, 2026 (2026-02-05T12:00:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-08T08:53:23.681Z. First observed: 2026-10-30T13:24:10.516Z. Retrieved: 2026-10-30T13:25:46.010Z.
Limits
Text as retrieved on October 30, 2026; originally published February 5, 2026. The post’s empirical evidence discussed here is from Belgian manufacturing; the evidence does not establish how well the findings apply to other sectors or economies. The post states that its views are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System.
Open question
How well do these Belgian manufacturing findings apply to other sectors or economies?
Source-stated
Lenzu argues that inflation becomes more sensitive to cost shocks once they are sufficiently large.
Once cost shocks exceed a threshold—around a 20 percent annual increase in our data—the slope steepens sharply.
Source-stated
Lenzu says firms reprice more often when price gaps are large, helping explain nonlinear inflation responses.
Firms in the tails—those with prices far above or below their desired price level—change prices much more often.
Source-stated
Lenzu argues that recognizing shifts between pricing regimes matters for inflation analysis and timely signals.
Recognizing when the economy shifts between these regimes is important for decision makers who rely on timely signals about changing inflation conditions.
Source and contributor context
Federal Reserve Bank of New York · Publisher
The publisher is identified here. No individual author has been inferred.
Source media
Media retrieval status: unchecked.
Terms and references
Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement.
Editorial provenance
Version 1. Publication ID: 33a515dd-9b64-68c3-100d-96f0bf76f052.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: uncertain by anthropic/claude-opus-5.5 on 2026-11-08T08:49:14.726Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: ffbe05a064c63a41c0fb66b9153d8b588889d1c03e11a820d2329aac4d2d2b12. Source text hash: ddc458479ff156db2765db73446fc01dc70f0e7ad64fbb9fdb342bed70a17e2f.
uncertain · 2026-11-08T08:49:14.726Z · anthropic/claude-opus-5.5
Publication: 33a515dd-9b64-68c3-100d-96f0bf76f052
attribution — pass: The reading correctly attributes the post to Simone Lenzu, published in the New York Fed's Liberty Street Economics. It keeps the arguments attributed to Lenzu and notes the institutional disclaimer.
Simone Lenzu is a financial research economist in the Federal Reserve Bank of New York’s Research and Statistics Group.
summary — uncertain: The summary faithfully tracks the argument. However, its central term, the Phillips curve, appears in the title but is never explained, and the definitions list is empty. A non-specialist would not learn that the slope describes how strongly inflation responds to cost or demand pressure. Producer price inflation is also unexplained. Smallest repair: add a plain-language gloss or a term-library tooltip for Phillips curve, for example that a steeper curve means prices react more strongly to cost shocks.
the steeper the slope, the stronger the pass-through, and the steeper the Phillips curve
date — pass: February 5, 2026 matches the instant's UTC day and the source dateline. The page's modifiedAt is the same day, a few hours later, and editedAfterPublication is not flagged. The reading uses no later-dated material and has no hindsight framing. The kind is publisher-page, so no archive disclosure is needed.
February 5, 2026
support — pass: The claims match the source: inflation steepens beyond a cost-shock threshold, firms in the tails reprice more often, and recognizing regime shifts matters for timely signals. The Calvo contrast and the Belgian-data limitation are grounded in the text. The open question about generalizability is posed as unknown rather than asserted.
when shocks are small, many wait; when shocks are large, more firms adjust, and by larger amounts
media — pass: No media was selected and no verified media candidates were supplied, so there is nothing to misidentify.
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