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Fed Doesn’t Demand Wage Growth Before Increasing Interest Rate
Federal Reserve officials have fuzzy views on how wage growth fits in with their objectives for the economy. They would like to see wages growing faster. It would give them confidence that the economy is closer to their dual goals of producing healthy job growth and modestly rising inflation. But the linkages between wages, jobs and inflation are unclear, and so they’re not banking on faster wage growth materializing. In classical models of the economy, as the unemployment rate falls, slack in the job market diminishes, producing upward pressure on wages. Because wages are such a large component of business costs, ... (full story)