The net decline in core measures of inflation over the past few years - even after taking account of possible understatement of inflation last year - is consistent with a noticeable gap in resource utilization still existing today.
Going forward, I anticipate continued strong growth in demand but, given persistent solid gains in productivity and potential output, only a gradual closing of the output gap. Under these circumstances, ongoing competitive pressures in labor and product markets should help to contain cost and price increases.