Despite significant rises in short-term CPI forecasts, these underlying inflation trends remained relatively stable, so that we were largely able to “look through” the oil price spike and set policy appropriately for a changing growth outlook in 2008. The rise in house prices posed an even greater challenge.
Time will tell which ones, but a few observations may be worthwhile at this point. First, the economy is making the adjustments required, even if it is a bit slower than we would ideally have liked.