Moreover, equity prices may be down because some combination of economic conditions and regulation make profits likely to be lower than was expected and experienced in the unsustainable period leading up to the crisis.
5 Relative to the entrenched inflation dynamics that existed before the pandemic, the sharp temporary increases in some categories of goods and services seem unlikely to leave an imprint on longer-run inflation behavior. To be sure, I will keep a close watch on a range of indicators for any signs of an unwelcome change in longer-term inflation expectations.