Plotting a course through such an environment, with the potential for a wide range of future outcomes, is indeed challenging. While we can state with certainty that we have greatly expanded and strengthened our toolkit to deal with various risks, it is important that we maintain a sense of humility about what we can forecast and, more to the point, what we can control.
Backward-looking factors appear to be becoming less important, and the forwardlooking anchor, inflation expectations, is strengthening. Phillips curve decompositions find that past low inflation dragged down wage growth from its long-term average by around 0.2 percentage points each year between 2014 and 2017.