Nevertheless, many business firms indicated to the District Banks that they expect high prices for energy and construction materials to persist.

These forecasts are higher than in the previous survey, particularly for the first half of 2006, suggesting increasing optimism among the forecasters.

Point to recession in both the manufacturing sector and the general economy.

The trajectory that emerges from this forecast is one in which inflation is temporarily high in the current quarter but quickly approaches the current estimate of long-run inflation of 2.5 percent.

Price pressures remain but continue to show a moderating trend.

If they tighten again in November, then the steps they've taken in three (interest rate) moves should meaningfully diminish the chances of inflation picking up going forward.

The employment index was sharply higher this month, and the average hours worked improved. Firms continued to report higher prices for inputs and for their own manufactured goods.

Higher prices for final manufactured goods were also more widespread this month, suggesting that higher costs have been passed on to customers.