A commentary piece from the Wall Street Journal says the Federal Reserve Fed is gearing up for its first rate increase in eight years... the risk is that nascent inflationary pressures generated by a tighter U.S. labor market will force the central bank into action earlier than many suspect.
In brief:
U.S. consumer price index ... first annual decline in more than five years
- But January's fall in headline CPI was entirely explained by the six-month collapse in oil prices
- The Fed cares about core CPI, which strips out volatile food and energy prices, ... last month rose 0.2% from December ... suggests that non-energy sectors have been immune from energy-led deflationary contagion
Unemployment near six-year lows, workers in some vital industries are finally pushing for higher wages:
- strikes at oil refineries and West Coast ports
- employees winning significant pay increases at Wal-Mart Stores Inc. and TJX Cos
- this is anecdotal evidence, not statistical proof of broad-based wage inflation. But as Deutsche Bank economist Torsten Slok observes, "We haven't seen anecdotes like these for six years...worker bargaining power is returning."
Bureau of Labor Statistics's January employment report showed a 0.5% month-on-month increase in hourly wages, the biggest jump since the financial crisis, and its quarterly employment cost index hinted at modest acceleration in the latter part of the year.
- These increases are small by historical standards. ... The Fed will want to see more sustained gains. But with a 5.7% jobless rate, which many now view as close to "full employment," we should recognize that monetary policy is extraordinarily accommodative. The Fed desperately wants to "normalize" policy, to stop the economic distortions created by more than six years of zero interest rates. Wage gains offer justification to start that.
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The article is gated (I think? ... give it a try): Wage Pressures May Give Fed Push
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A hike is coming in the US. If not June, soon thereafter (Oh, that's my opinion, not from the article)
