, and that there remains much to be learned from this extraordinary period. our statement on longer - run goals and monetary policy strategy emphasizes our commitment to reviewing our principles and making appropriate adjustments through a thorough public review every five years. as we begin this process later this year, we will be open to criticism and new ideas, while preserving the strengths of our framework. the limits of our knowledge — so clearly evident during the pandemic — demand humility and a questioning spirit focused on learning lessons from the past and applying them flexibly to our current challenges. blanchard and bernanke ( 2023 ) use a traditional ( flexible ) phillips curve approach to reach this conclusion for the u. s. blanchard and bernanke ( 2024 ) and dao and others ( forthcoming ) examine a broader set of countries using similar approaches. di giovanni and others ( 2022 ) and bai and others ( 2024 ) use different techniques and emphasize supply constraints and shocks in the increase in inflation over 2021 and 2022. public references aaronson, stephanie r., mary c. daly, william l. wascher, and david w. wilcox ( 2019 ). “ okun revisited : who benefits most from a strong economy, ” finance and economics discussion series 2019 - 072. washington : board of governors of the federal reserve system, september, http : / / dx. doi. org / 10. 17016 / feds. 2019. 072. bai, xiwen, jesus fernandez - villaverde, yiliang li, and francesco zanetti ( 2024 ). “ the causal effects of global supply chain disruptions on macroeconomic outcomes : evidence and theory, ” nber working paper series 32098. cambridge, mass. : national bureau of economic research, february, https : / / www. nber. org / papers / w32098. ball, laurence, daniel leigh, and prachi mishra ( 2022 ). “ understanding us inflation during the covid - 19 era, ” brookings papers on economic activity, fall, pp. 1 – 54, https : / / www. brookings. edu / articles / understanding - u - s - inflation - during - thecovid - era. benigno, pierpaolo, and gauti b. eggertsson ( 2023 ). “ it ’ s baaack : the surge in inflation in the 2020s and the return of the non - linear phillips curve

closed at the end of last month, the u. s. federal government's budget deficit shrank, as federal tax revenues came in at a greater - than - expected pace. although the final accounting for the fiscal year is yet to be tallied, treasury data indicate that the federal budget deficit was probably equal to about 2 - 1 / 2 percent of gdp - - below its level of about 3 - 1 / 2 percent of gdp in the preceding two years. that said, the budget figures for the fiscal year just ended were little affected by the fiscal policy response to the recent hurricanes. only a small portion of the emergency federal outlays budgeted for hurricane relief were actually spent in september, the last month of the fiscal year. the bulk of the hurricane - related spending and tax relief will show up in the budget accounts in the current and next fiscal years. moreover, the total magnitude of the federal response is still unknown, adding to the uncertainty associated with the fiscal outlook. viewed from a longer - term perspective, the financial position of the u. s. federal budget has oscillated dramatically over the past ten years. ten years ago, the federal budget had a deficit that amounted to about 2 - 1 / 2 percent of gdp, roughly similar to the current percentage, and forecasts at that time pointed to some widening in this budget gap in future years. budget agreements in earlier years - - 1990 and 1993 - - had both raised taxes and reduced spending, and the combination of these actions had helped lower the federal budget deficits from the levels of previous years. these budget agreements demonstrated the desire of policymakers to undertake some hard steps necessary to reduce the deficit. they had also put in place caps on so - called discretionary federal spending - - that is, the portion of federal spending that is allocated annually - - and had required that legislative changes to taxes or entitlement spending be deficit neutral, a requirement called the paygo rule. the paygo rule mandated that changes in taxes or entitlement spending be offset by other changes in taxes or entitlement spending so that the deficit was not increased. despite the enactment of deficit - reducing legislation and the existence of these budget rules, the best estimates ten years ago had the federal budget still running deficits far into the future. however, as it turned out, a number of positive developments pushed the budget into surplus in 1998 through 2001. importantly, bipartisan support in the congress for establishing and maintaining some measure of