Despite the elevated headline inflation of the past four  4  BIS Review 64/2008  years, we have seen little evidence of faster wage inflation. And healthy gains in productivity have helped to hold down labor cost pressures on prices. My expectations for moderating inflation and limited spillover effects from commodity price increases depend critically on the continued stability of inflation expectations.
In that regard, year-ahead inflation expectations of households have increased this year in response to the jump in headline inflation. Of greater concern, some measures of longer-term inflation expectations appear to have edged up.