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The Phillips curve framework, which includes the output gap and the natural rate hypothesis, plays a central role in the canonical model of monetary policy. We use the Federal Open Market Committee (FOMC) transcripts and the Federal Reserve Board staff's Greenbook forecasts for inflation, unemployment, and the output gap to examine the role of the Phillips curve framework in the Fed's policymaking from the early 1980s through 2002 (the last year that FOMC transcripts are available). The FOMC's transcripts allow us to trace the evolution in the policymakers' discussion of the Phillips curve framework over time. The Fed's internal forecasts allow us to assess the extent to which the Greenbook inflation forecasts were based upon a Phillips curve framework. We document heated debate about the Phillips curve framework among policymakers starting in the mid-1990s. We find that during this period, FOMC policymakers were generally divided between those who thought estimates of the gap were useful for policymaking and those who thought that the relationship between gap measures and current or future inflation was so unreliable as to provide no policy guidance. Our empirical analysis demonstrates that a gap-based Phillips curve equation cannot explain the Greenbook inflation forecasts from this period. An examination of the Federal funds target together with other information from the Greenbook suggests to us that, at least for a period of time in the late 1990s, monetary policy decisions were not based upon the Phillips curve.

The Phillips curve and US monetary policy: what the FOMC transcripts tell us