However, once oil and import prices stop falling, the downward pressure on domestic inflation from those sources should wane, and as the labor market strengthens further, inflation is expected to rise gradually to 2 percent over the medium term. In light of the current shortfall of inflation from 2 percent, the Committee is carefully monitoring actual and expected progress toward its inflation goal.
Of course, inflation expectations play an important role in the inflation process, and the Committee’s confidence in the inflation outlook depends importantly on the degree to which longer-run inflation expectations remain well anchored.