Post-COVID inflation dynamics: Higher for longer

We implement a novel nonlinear structural model featuring an empirically successful frequency-dependent and asymmetric Phillips curve; unemployment frequency components interact with three components of core personal consumption expenditures (PCE)-core goods, housing, and core services ex-housing-and a variable capturing supply shocks. Forecast tests verify accuracy in its unemployment-inflation trade-offs, crucial for monetary policy. Using this model, we assess the plausibility of the December 2022 Summary of Economic Projections (SEP). By 2025Q4, the SEP projects 2.1% inflation; however, conditional on the SEP unemployment path, we project 2.9%. A fairly deep recession delivers the SEP inflation path, but a simple welfare analysis rejects this outcome.