Inflation has also returned to Europe, but the European Central Bank is at the moment refusing to increase its interest rates. Why? Inflation is increasing, but for a reason which is very simple and easy to identify, which is the increase in commodity prices, or rather the end of a period marked by sharp falls in commodities.
As I have outlined tonight, I think that the risks to my outlook for economic activity may be skewed a bit to the downside, while those to my forecast of gradually declining inflation are tilted to the upside. In my view, in the current circumstances, the upside risks to inflation are of greater concern.