However, the recent bump up in inflation also likely reflected a reversal of unusually low readings earlier last year for apparel, prescription drugs, and so-called nonmarket items in the index, and the contribution of these items to core inflation is likely to wane.
In my view, long-run inflation dynamics are influenced importantly both by prospects for the future balance of aggregate supply and demand, as well as by longer-run inflation expectations (Mishkin, 2007a). By a range of measures, longer-run inflation expectations appear to have remained reasonably well contained even as recent readings on headline inflation have been elevated.