More subtly, my conclusion that the effects on inflation of transitory changes in commodity prices or in the value of the dollar tend to dissipate in the longer run depends on the assumption that the public's inflation expectations are well anchored.
If expectations are not well tied down, inflationary impulses that are in themselves transitory may become embedded in expectations and hence affect inflation in the longer term. Therefore, an essential prerequisite for controlling inflation is controlling inflation expectations. 5  My presumption that the current slack in the labor market is primarily cyclical, rather than structural, is based on several observations.