As the economic results for the second half of 1996 show, and the more recent monthly indicators confirm, there have been substantial increases in spending on housing, motor vehicles and other consumer durables. Sales in these sectors have picked up in response to the lower interest rates, just as expected.
All things considered, I believe there are good reasons to expect solid economic expansion in coming months. What are the risks that inflation will accelerate? Let me now turn to the inflation implications of this scenario. If the economy grows at the above-potential rates that the Bank foresees, won’t inflation accelerate? As I noted, this question seems to lead to two, quite opposite, concerns.