The prices of oil and other commodities, while remaining quite volatile, have fallen, on net, from their recent peaks, and the dollar is up from its mid-summer lows. The declines in energy prices have also led to some easing of inflation expectations, as measured, for example, by consumer surveys and the pricing of inflation-indexed Treasury securities.
If not reversed, these developments, together with a pace of growth that is likely to fall short of potential for a time, should lead inflation to moderate later this year and next year. Nevertheless, the inflation outlook remains highly uncertain. Indeed, the fluctuations in oil prices in the past few days illustrate the difficulty of predicting the future course of commodity prices.