In an environment of considerable persisting slack in labor and product markets, and with productivity having increased substantially in recent quarters, cost and price inflation should remain quite subdued.
In the short run, headline inflation will be driven importantly by movements in energy and food prices; judging from the structure of futures prices, markets are not expecting a further sharp rise in those prices, and thus headline inflation should retreat toward core inflation. Inflation outside of the food and energy sectors has been declining slowly, held up by relatively stable inflation expectations.