other industries have been small. initially, there had been some concern that sars would disrupt the just - in - time inventory systems of u. s. manufacturers. many of those systems rely on components from asia, and any disruption in the flow of these goods has the potential to affect production in the united states. so far, however, u. s. manufacturing output has not been noticeably affected. in recent months, inflation has dropped to very low levels. as i noted earlier, energy prices already are reacting to the decline in crude oil prices, and core consumer price inflation has been minimal. inflation is now sufficiently low that it no longer appears to be much of a factor in the economic calculations of households and businesses. indeed, we have reached a point at which, in the judgment of the federal open market committee, the probability of an unwelcome substantial fall in inflation over the next few quarters, though minor, exceeds that of a pickup in inflation. mr. chairman, the economic information received in recent weeks has not, in my judgment, materially altered the outlook. nonetheless, the economy continues to be buffeted by strong cross currents. recent readings on production and employment have been on the weak side, but the economic fundamentals - including the improved conditions in financial markets and the continued growth in productivity - augur well for the future.

. in the model shown here, the appreciation has its largest effect on gross domestic product ( gdp ) growth in the second year after the shock. thus, it is plausible to think that the rise in the dollar over the past year would restrain growth of real gdp through 2016 and perhaps into 2017 as well. the rise in the dollar since last summer, of about 17 percent in nominal terms, with its associated declines in non - oil import prices, could plausibly be holding down core inflation quite noticeably this year. commodity prices other than oil are also of relevance for inflation in the united states. prices of metals and other industrial commodities, and agricultural products, are affected to a considerable extent by developments outside the united states, and the softness we ’ ve seen in these commodity prices, has in part reflected a slowing of demand from china and among the many papers finding a role for resource utilization in affecting inflation based on evidence from macroeconomic time - series data, see robert j. gordon ( 2013 ), “ the phillips curve is alive and well : inflation and the nairu during the slow recovery ( pdf ), ” nber working paper series 19390 ( cambridge, mass. : national bureau of economic research, august ) ; or douglas o. staiger, james h. stock and mark w. watson ( 1997 ), “ how precise are estimates of the natural rate of unemployment? ” in christina d. romer and david h. romer, eds., reducing inflation : motivation and strategy ( chicago : university of chicago press ), pp. 195 – 246. for similar results based on cross - sectional evidence, see michael t. kiley ( 2014 ), “ an evaluation of the inflationary pressure associated with short - and long - term unemployment ( pdf ), ” finance and economics discussion series 2014 – 28 ( washington : board of governors of the federal reserve system, march ) ; or, for wages instead of prices, christopher l. smith ( 2014 ), “ the effect of labor slack on wages : evidence from state - level relationships, ” feds notes ( washington : board of governors of the federal reserve system, june 2 ). there has also been debate regarding other potential channels through which global factors could affect domestic inflation – for example, whether measures of foreign resource utilization play an important independent role. for evidence supporting such global factors, see claudio borio and andrew filardo ( 2007 ), “ globalisation and inflation : new cross - country evidence on the global