Inventory levels were reduced significantly in response to the slowdown in domestic economic activity and the high costs of carrying stock. In the first half of 1999 the real domestic final demand for goods and services declined markedly when the capital spending of public corporations contracted.
As these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal. The pandemic continues to pose risks to the economic outlook. Progress on vaccinations has limited the spread of COVID-19 and will likely continue to reduce the effects of the public health crisis on the economy.