The article explores how trend inflation and the real-activity gap affect inflation in G7 countries since 1960. By analyzing inflation and unemployment data, the researchers found that both trend inflation and the inflation gap play a significant role in determining inflation levels. The real-activity gap, which measures the difference between actual unemployment and its natural rate, is a key factor influencing the inflation gap. This suggests that the New Keynesian Phillips Curve model, when adjusted to include trend inflation, is relevant for understanding inflation in G7 countries. The study also provides new estimates of trend inflation for these countries and identifies structural breaks in the variability of trend inflation and the inflation gap.