Moreover, given that there is a high degree of uncertainty surrounding the progress in households’ balance-sheet adjustments, the prospects for the U.S. economy also present some downside risk. It is possible that the pace of its economic recovery will remain more moderate than expected. Regarding risks associated with prices, there are mainly two types.
The first risk concerns developments in firms’ and households’ medium- to long-term inflation expectations; the second risk relates to developments in import prices. With this second risk, there is a possibility that crude oil prices will surge mainly reflecting geopolitical risk.