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.
Price and compensation inflation have, in fact, remained moderate at high levels of resource utilization, despite rapid increases in energy and commodity prices, suggesting that some forces not yet fully identified may be helping to keep them contained. Those forces might include robust underlying productivity growth here at home or competition from abroad.