I will mention two considerations that will be important in assessing whether inflation is likely to move back to 2 percent as the economy recovers. First, we anticipate that, as labor market slack diminishes, it will exert less of a drag on inflation. However, during the recovery, very high levels of slack have seemingly not generated strong downward pressure on inflation.
3  In particular, foreign central banks, not the Federal Reserve, bore the credit risk associated with the foreign central banks’ dollar-denominated loans to financial institutions. 4  Primary dealers are broker-dealers that trade in U.S. government securities with the Federal Reserve Bank of New York.