puzzling finding comes from a survey of business pricing decisions conducted by blinder, canetti, lebow, and rudd, in which only a small share of respondents claimed that expected aggregate inflation affected their pricing at all. 11 how do we reconcile this result with our strong presumption that expectations are of rich and steindel ( 2007 ) provide a recent analysis of alternative measures of core inflation. bernanke ( 2007 ). orphanides and williams ( 2007 ) and kiley ( 2008 ) are good examples, but there are many others. blinder and others ( 1998 ). central importance for explaining inflation? perhaps expectations affect actual inflation through some channel that is relatively indirect. the growing literature on disaggregated price setting may be able to shed some light on this question. 12 finally, a large set of questions revolve around how the central bank can best monitor the public's inflation expectations. many measures of expected inflation exist, including expectations taken from surveys of households, forecasts by professional economists, and information extracted from markets for inflation - indexed securities. unfortunately, only very limited information is available on expectations of price - setters themselves, namely businesses. which of these agents'expectations are most important for inflation dynamics, and how can central bankers best extract the relevant information from the various available measures? conclusion this evening i have touched on only a few of the questions that confront policymakers as we deal with the challenges we face. the contributions of economic researchers in helping us to address these and other important questions have been and will continue to be invaluable. i will conclude by offering my best wishes for an interesting and productive conference. references atkeson, andrew, and lee e. ohanian ( 2001 ). " are phillips curves useful for forecasting inflation? " federal reserve bank of minneapolis, quarterly review, vol. 25 ( winter ), pp. 2 - 11. bernanke, ben s. ( 2007 ). " inflation expectations and inflation forecasting ", speech delivered at the monetary economics workshop of the national bureau of economic research summer institute, cambridge, mass., july 10. bils, mark, and peter j. klenow ( 2004 ). " some evidence on the importance of sticky prices ", journal of political economy, vol. 112 ( october ), pp. 947 - 85. blinder, alan s., elie r. d. canetti, david e. lebow, and jeremy b.

of trends in labor costs and thus differing implications for inflation. the interpretation of changes in labor productivity also affects the measurement of marginal cost. as economists have recognized for half a century, labor productivity tends to be procyclical, in contrast to the theoretical prediction that movements along a stable, according to one study, if the share of world trade and world gross domestic product for non - industrial countries had remained at its 2000 levels, then by 2005, real oil prices would have been 40 percent lower, and real metals prices 10 percent lower, than they actually were ( pain, koske, and sollie, 2006 ). since 2005, continued strong growth in the demands for resources of emerging market economies have likely put further considerable upward pressure on commodity prices. for contrast, the demand for oil by members of the organisation for economic co - operation and development ( oecd ) has been essentially flat since 2004. gali and gertler ( 1999 ). rudd and whelan ( 2007 ), kiley ( 2007 ). gordon ( 1988 ). conventional production function should generate countercyclical productivity behavior. many explanations for procyclical productivity have been advanced, ranging from labor hoarding in downturns to procyclical technological progress. a better understanding of the observed procyclicality of productivity would help us to interpret cyclical movements in unit labor costs and to better measure marginal cost. the relationship between marginal cost, properly measured, and prices also depends on the markups that firms can impose. one important open question is the degree to which variation over time in average markups may be obscuring the empirical link between prices and labor costs. considerable work has also been done on the role of time - varying markups in the inflation process, but a consensus on the role of changing markups on the inflation process remains elusive. 5 more research in this area, particularly with an empirical orientation, would be welcome. real - time policymaking the measurement issues i just raised point to another important concern of policymakers, namely, the necessity of making decisions in " real time, " under conditions of great uncertainty – including uncertainty about the underlying state of the economy – and without the benefit of hindsight. in the context of phillips curve analysis, a number of researchers have highlighted the difficulty of assessing the output gap – the difference between actual and potential output – in real time. 6 an inability to measure the output gap in real time obviously limits the usefulness of the