The non-accommodation of the second oil price rise led to a contraction of output in the short run, but contained the inflationary impact of the shock.
The central tendency of FOMC participants’ forecasts for core PCE inflation – 2 to 2-1/4 percent for 2007 and 1-3/4 to 2 percent in 2008 – is unchanged from February. If energy prices level off as currently anticipated, overall inflation should slow to a pace close to that of core inflation in coming quarters.