Over the short term, annual inflation is expected to remain at elevated levels mainly on account of the most recent increases in oil prices and some adverse base effects. Over the medium term, annual inflation is expected to decline gradually, but the extent and pace of its deceleration to a level compatible with price stability depends on several factors.
Lagged indirect effects, stemming from higher production costs induced by past oil price increases, could exert upward pressure on inflation. And previously announced increases in administered prices and indirect taxes  2  BIS Review 9/2006  can be expected also to have an adverse impact.