The current economic narrative in the March projections is for a slowing of growth in wages and profit margins over the next three years.
If this turns out not to be the case – for example, if we end up in a situation where staggered price and wage-setters engage in back-and-forth attempts to fully offset real income declines (i.e., a wage-price spiral) – it would call for a stronger monetary policy response in order to mitigate against the risk of this even more persistent inflation.