Recent quantitative dynamic generai equilibrium models bave cast serious doubts on thè explanatory power of staggered wage/price setting in accounting for both output and inflation persistence. We enlarge a dynamic generai equilibrium model with staggered wages by incorporating Keynesian relative wage concern on thè part of workers. In contrast to previous models of staggered wages/prices, both output and inflation persistence is a robust finding of thè model. Persistence results hold for ali thè sensible parametrisations.