Fed Raises Interest Rates and Signals Additional Increase in 2018 - http://earlyretireonline.com | how to earn money fast

June 13, 2018 6:09 pm
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Officials aren’t waiting to see wage growth

The rise in consumer prices over the last year has effectively wiped out any wage increases for nonsupervisory workers, the latest Consumer Price Index data suggest. That is odd for an economy with a tight labor market, with unemployment running at a 3.8 percent. And some analysts say it’s a reason for officials to slow their pace of rate increases, since the benefits of a hot economy have not yet translated into a significant wage boost for workers.

At a comparable time of low unemployment, in 2000, “wages were growing at near 4 percent year-over-year and the Fed’s preferred measure of inflation was 2.5 percent,” both above today’s levels, Tara Sinclair, a senior fellow at the Indeed Hiring Lab, said in a research note. “The Fed continues to promise to move slowly and to carefully watch all incoming data. Too many increases too quickly could choke the economy before we really see how good it could get.”

There was no sign in Wednesday’s releases that most Fed officials share that concern, despite seeing even lower unemployment in 2018 than previously anticipated.

A hot topic for the news conference: Will there be more news conferences?

Expectations are rising that, only a few years after instituting quarterly news conferences under the chairman at the time, Ben S. Bernanke, the Fed is preparing to hold them after every meeting. Mr. Powell said he was “carefully considering” the idea in March, during his inaugural news conference as chairman. “My colleagues and I are committed to communicating as clearly as possible about what we’re doing and why we’re doing it,” he said. Some analysts believe he could announce such a move on Wednesday.

As it stands, markets only anticipate rate increases to occur at the meetings that are followed by a question-and-answer session. Shifting to a news conference after every meeting would give officials more flexibility on when to raise rates, a factor that Mr. Powell alluded to in March, when he said “I would want to think very carefully about it and make sure that no one would take more frequent press conferences as a signal of the path of policy.”

The speculation has made its way into research notes previewing Wednesday’s meeting. BNP Paribas analysts wrote this week that “An announcement of this nature would likely come during a prescheduled news conference, and there has been recent chatter in the press on this topic from a few F.O.M.C. members.”

They added, “While the initial market reaction could be more hawkish, we would perceive such a move as relatively neutral, as it would just allow more flexibility in terms of the timing of rate hikes.”


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