Or, as David Walton of the Bank of England put it some weeks ago: “Has oil lost its capacity to shock?” 2 There are several plausible explanations for the muted impact of oil price increases in recent times.
It is important that, as the forces retraining inflation dissipate or reverse, that this upward pressure on inflation is not reinforced by inflationary pressures generated from very high utilization rates. The key to sustaining the best possible performance going forward is making the transition from the current state where performance is exceptional but unsustainable to the best possible sustainable state.