As I discussed in some detail in a speech earlier this year (Bernanke, 2004a), the direct effects of commodity price increases and a depreciating dollar on inflation at the consumer level are generally small.
I identified the three phases of the dynamic adjustment process moving out from the deflationary equilibrium to the normal equilibrium, thereby avoiding the over- and undershooting of the inflation rate and the longterm interest rate, notably during the transition period. Recently, former Federal Reserve Governor Laurence Meyer (2005) has presented a threestep strategy for the future of Japan's monetary policy.