This paper investigates the predictions of a simple optimizing model of nominal price rigidity for the aggregate price level and inflation dynamics. The model is compared with a perfectly competitive, flexible-price 'benchmark' model, and the fit with U.S. data is evaluated. The model's predictions are derived from the firms' optimal pricing problem, assuming given paths for nominal labor compensation, labor productivity, and output. The results are presented in terms of the predicted path of the price/unit labor cost ratio, with parameters chosen to maximize the fit with the data. The findings show that a model of nominal price rigidity provides a close approximation to both the price/unit labor cost ratio and the inflation series, even with a simple measure of marginal costs. This supports the hypothesis of significant price stickiness and a forward-looking model of price setting. The degree of fit suggests that variations in marginal costs unrelated to changes in unit labor costs are not necessary to explain U.S. price level fluctuations. The paper also discusses the robustness of the results to different specifications of the forecasting system for unit labor costs.This paper investigates the predictions of a simple optimizing model of nominal price rigidity for the aggregate price level and inflation dynamics. The model is compared with a perfectly competitive, flexible-price 'benchmark' model, and the fit with U.S. data is evaluated. The model's predictions are derived from the firms' optimal pricing problem, assuming given paths for nominal labor compensation, labor productivity, and output. The results are presented in terms of the predicted path of the price/unit labor cost ratio, with parameters chosen to maximize the fit with the data. The findings show that a model of nominal price rigidity provides a close approximation to both the price/unit labor cost ratio and the inflation series, even with a simple measure of marginal costs. This supports the hypothesis of significant price stickiness and a forward-looking model of price setting. The degree of fit suggests that variations in marginal costs unrelated to changes in unit labor costs are not necessary to explain U.S. price level fluctuations. The paper also discusses the robustness of the results to different specifications of the forecasting system for unit labor costs.