It still appears that inflation is being driven by cost-push factors, as illustrated by the benign core inflation outcomes. However, the interaction between higher headline inflation and inflation expectations of wage and price setters is critical.
To date inflation expectations appear to be anchored at around the upper level of the target range, but the longer inflation remains outside the target, particularly if it surprises on the upside, the more precarious these expectations become, and the greater the upside risk to the inflation outlook.