These effects are now reversing in the wake of the substantial declines in commodity prices since the summer. Moreover, the prices of imports now appear to be decelerating, and consumer surveys and yields on inflation-indexed Treasury securities suggest that expected inflation has held steady or eased.
If not reversed, these developments, together with the likelihood that economic activity will fall short of potential for a time, should bring inflation down to levels consistent with price stability. Over time, a number of factors are likely to promote the return of solid gains in economic activity and employment in the context of low and stable inflation.