Answer
If the Fed based its decisions on the belief that the natural rate of unemployment is lower than what it actually is, then the inflation rate will increase.
Work Step by Step
With the current unemployment rate of 5% being greater than the Fed's perceived natural unemployment rate of 4%, then the economy could be deemed to be in a recession. (As a reminder, a recession can happen when the natural rate of employment is lower than the current employment rate.)
To combat the recession, the Fed would increase the money supply. In turn, the inflation rate will increase. After enough time, the economy will shift to another Phillips curve (and to the right on the new Phillips curve). However, should the natural unemployment rate be lower than the current unemployment rate, then the Fed will have to increase the money supply again. In turn, the unemployment rate will fall, and inflation will increase.
In short, the economy will continue to face increasing inflation and an increased Phillips curve.
