For example, the Federal Reserve's measure of capacity utilization in manufacturing has moved up 2 percentage points during the past nine months, to around 80-1/2 percent, a touch above its longer-run average. Similarly, the unemployment rate has fallen almost 1/2 percentage point from early 2005 to around 4-3/4 percent last month. Nevertheless, the underlying rate of inflation has remained moderate.
Headline inflation, of course, has been boosted by the jump in energy prices. However, the run-up in the prices of energy and other commodities appears to have had only a modest effect on prices for non-energy goods and services.