After adjusting for the rising share of imports in domestic price increases, we see little indication of a reduction in the effect of import prices on U.S. inflation. We have some evidence, however, of a reduced effect of exchange rates on import prices (Ihrig, Marazzi, and Rothenberg, 2006), although this result may be sensitive to specification (Thomas and Marquez, 2006).
4  One key element of the inflation process that I have not yet mentioned is labor costs. Recent developments in labor markets make it difficult to assess changes in the role of labor costs in the inflation process. For example, since the mid-1990s, incentive-based employee stock options have become an important form of compensation.