Compare this with the present situation: the U.S. economy has been expanding at an average rate of about 3½ per cent for 8 quarters, current levels of demand are above most estimates of its capacity to produce, and the unemployment rate has been at or below 5 per cent for several months. Yet inflation has remained well behaved. What is happening?
Are we operating in a different environment? There are, of course, some temporary factors -- such as the appreciation of the U.S. dollar, the decline in energy prices, and the slack in overseas economies -- that are currently helping to suppress inflationary pressures in the United States. However, a number of observers are suggesting that other, more permanent factors may also be contributing.