In addition, technological advances will continue to boost demand for capital equipment by reducing its costs and increasing its usefulness in improving efficiency. If, as I anticipate, economic growth moderates a touch and pressures on labor and product markets do not intensify substantially further, I believe that underlying inflation should remain roughly stable.
That sanguine picture is reinforced if crude oil prices do, in fact, turn out to be relatively flat over the remainder of this year. Such a flattening of oil prices would reduce headline inflation directly and would diminish the threat of higher energy prices becoming more deeply embedded in the inflation process by raising inflation expectations.