These are important negatives but by themselves should not derail the recovery. Looking at the economy more broadly, inflation has drifted lower in recent months, which is typical following a recession. While energy prices have kept consumer price inflation around 2 percent, inflation in non-food and non-energy prices – which is core inflation – has been running at rates of around 1 percent.
These inflation rates are likely to continue for the next year or so. However, as the economic recovery continues or picks up momentum, I expect inflation to drift higher. As for risks to this outlook, there are several. The fluid situation in Greece and Europe reminds us to be wary.