Why Has Inflation in the United States Remained So Low? Reassessing the Importance of Labor Costs and the Price of Imports

This paper examines some of the factors that have been influential in keeping inflation low in the United States during 1995-98, despite strong growth and high levels of employment. Our results identify three important variables: declines in import prices, a slowdown in the growth of nonwage labor compensation, and a decline in labor costs. We also reassess the role of labor costs and import prices in determining price inflation.