Rising Wages Scare the Fed: ‘We Need to Get on with This’

QE-Unwind may start in September. ‘We need to get on with this,’ said Philadelphia Fed President Patrick Harker, a voting member of the policy-setting Federal Open Market Committee. He was talking about the Fed’s plan, detailed at the last meeting, to unwind QE. A possible moment to begin the process, he said, is the meeting in September.
His reasons: Complaints by his business contacts about rising wages.
Rising wages – regardless of what Fed Chair Yellen says publicly to soothe the nerves of the many underpaid workers – set off alarm bells at the Fed and push it into action. Not that all wages are rising. But average wages are rising faster than inflation, and in a number of sectors there are significant wage pressures. Businesses gripe. The Fed listens.
Harker told the Financial Times there was ‘very little slack’ left in the labor market. ‘There is a rate [of unemployment] below which you are going to start to see a significant acceleration of wages.’

This post was published at Wolf Street on Jun 21, 2017.