There is, however, more than the usual degree of uncertainty around the outlook for inflation and wages. It is still unclear as to whether, and at what pace, the demand for goods will normalise as infection rates decline. The speed at which the supply side of the economy can respond to changes in the demand side is also uncertain.
And we have no contemporary experience to assess how wage outcomes will evolve at a national unemployment rate below 4 per cent. A broader uncertainty is the extent to which other central banks will have to increase interest rates to return inflation to lower rates.