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mpc: 6 The sustainability of the US recovery this year now seemed less in question, given the continuing expansionary policy stance and the weaker US dollar. It was, however, unclear when inflationary pressures might begin to emerge. On the one hand, productivity growth was still rapid and there appeared to be a substantial margin of spare capacity in both product and labour markets; inflation on the core consumer expenditures deflator measure was falling; and forward interest rates did not suggest that market participants were expecting inflation to rise significantly in the medium term. On the other hand, non-oil commodity prices had increased by around 20% in dollar terms in the past six months or so and input and output producer price inflation had been picking up. The larger price rises for those components of the US Consumer Prices Index omitted from the `core' measure, such as food and energy, might reflect the strengthening recovery of world demand rather than temporary factors. It was also unclear whether the large US current account deficit would continue to be financed by inflows on the capital account without further falls in the value of the US dollar. These uncertainties entailed some risk that US long bond yields might rise significantly.