However, I think the evidence shows that over the past 25 years most supply shocks have been transitory – and have had no long-lasting imprint on longer term inflation, or on inflation expectations. Nonetheless, recent historical trends do not always continue, so it is important to monitor inflation dynamics very closely to make sure that this pattern is continuing in the incoming data. In particular, I will look intently at whether there is any evidence that the expectations of underlying inflation have changed. To date, expectations seem quite stable and show no evidence of diverging from the recent past. I am committed to responding decisively, and as forcefully as necessary, to ensure that long-term inflation expectations remain stable and that food and energy price increases are not passing through to other prices.7 Given the important role of labor costs in a developed, services-focused economy such as the United States, it is important to closely monitor trends in labor markets. Currently, wages  6  The average annual expected price change they expect over the next 5 to 10 years. 7  See for example the comments on commodity price pressures and monetary policy by my colleague William Dudley, president of the New York Federal Reserve Bank and Vice Chair of the Federal Open Market Committee: “Inflation expectations are well-anchored today and we intend to keep it that way.
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