When the effects of these transitory influences wane, inflation will begin to move closer to our 2 percent objective for the personal consumption expenditures deflator. Second, the tightening of the labor market may soon lead to some strengthening in the labor compensation trend. Although the recent data are as a whole inconclusive, I find it noteworthy that the four-quarter change of the Employment Cost Index for all civilian workers, which I view as the most reliable indicator of labor cost trends, rose by 2.6 percent as of the first quarter of this year, up from around 2 percent in the first quarter of 2014. Also, work done by my staff suggests that we are at that point in the labor market recovery where, in the past, we have typically seen a pickup in wage compensation. Third, the risk that inflation expectations, which are important in influencing inflation outcomes, might become unanchored to the downside seems to have diminished. In particular, anxieties created by the decline in breakeven inflation compensation measures based on the relative yields of nominal Treasuries versus TIPs have lessened. For example, the 5-year forward, 5-year inflation compensation measure has climbed by about 25 basis points from its low point in late January. 3 Implications for monetary policy So what are the implications of the economic outlook for U.S. monetary policy?
2  BIS central bankers’ speeches  Regarding global activity, a stronger growth outlook has consolidated in developed economies together with a slowdown in the emerging world. Still, some downward adjustments are being made to the projections for this year, mostly driven by actual first-quarter data, leading to a marginal adjustment in the overall figure. Thus, it is expected that in the period 2014–2015 our trading partners will grow 3.7 percent on average, a tenth of a point less than was expected in March. In Latin America a less favorable picture emerges. Downward revisions in Argentina, Brazil and Mexico stand out in these settings. The price of copper has fluctuated significantly in recent months. After coming close to $ per pound, it returned to the order of $ The baseline scenario assumes copper prices of 3.1 and 2.9 dollars per pound in 2014 and 2015, respectively. The terms of trade would fall this year slightly less than projected the March IPoM, but somewhat deeper in 2015 (table 1). Inflation has remained well contained in developed countries, while in emerging markets, particularly in Latin America, the short-term outlook has been revised upwards, reflecting the depreciation of Latin American currencies in the past year. This, plus the changes in parities mean that foreign dollar inflation this year and next will be somewhat higher than forecast in the last Report. The Board estimates that in the baseline projection scenario, inflation in Chile will remain above 4 percent still for some months, ending 2014 around that figure.