For example, a further spurt in energy and commodity prices could be passed through into core inflation to a greater extent than seems to have been occurring recently; the threat of that outcome probably is especially great when the economy is already operating at a high level.
If the economy does not moderate somewhat, pressures on resources will increase, further raising the odds of higher inflation. And as I discussed earlier, historical patterns suggest that resource utilization is already in a zone that at times has been associated with the emergence of inflation pressures. But the risks are not all one-sided.