US Wages Gains Will Get Fed's Attention; No Rate Hike Yet
Mohammad Ali (@ChaudhryMAli88) Published November 04, 2018 | 10:12 AM
Washington, Nov 4 (UrduPoint / Pakistan Point News - 4th Nov, 2018 ) :Wage gains at long last have made an appearance in the US economy after a baffling absence amid robust job growth but the Federal Reserve is expected to hold its fire next week.
Central bankers certainly will take notice of the recent data, with especial focus on everything contributing to inflation, but have made it clear they are committed to a gradual pace of increases in the benchmark lending rate, meaning the fourth hike of the year will not come until December.
The Fed's rate-setting Federal Open Market (FOMC) meets Wednesday and Thursday but, in keeping with recent custom, economists do not expect any moves to be made since this meeting is not one that will be followed by a press conference with Fed Chairman Jerome Powell.
That dynamic will change next year when Powell will hold a briefing after every policy meeting, making economists' forecasts a bit more lively.
Fed officials have made it clear the economy can continue to perform well for some time with the current course of rate increases.
Three more are expected next year as the central bank removes stimulus from the economy to prevent price pressures from accelerating.
The meeting takes place against the backdrop of President Donald Trump's repeated attacks on Powell for raising rates, which has injected an unwelcome political element into the deliberations.
Trump said the Fed has gone "crazy" and posed the greatest threat to his economic policies by moving too fast.
"He was supposed to be a low-interest-rate guy. It's turned out that he's not," Trump said.
But the Fed has made it clear more rate hikes will be needed, since as companies increasingly are having difficulty finding and keeping workers, which likely means wages will rise faster.
And firms also are facing price increases due to Trump's aggressive trade policies that have imposed steep tariffs on steel, aluminum and thousands of needed inputs.
- Don't kill the recovery - Diane Swonk of Grant Thornton said the central bank was trying to fine tune the economy so that it can continue to grow without igniting inflation.
"The Fed is not trying to kill the economy," she said in a research note.
Instead, the FOMC members "are trying to pace us so that we can extend the length of this marathon we are now running." The recovery from the 2008 global financial crisis is now in its 10th year, making it the second-longest of the post-World War II era. "The FOMC would like it to exceed the 1990s in length," Swonk said.
Able to declare victory with half of its dual mandate achieved -- full employment, as seen by the 48-year low in the jobless rate of 3.7 percent -- central bankers are watching closely for any buildup of inflation.
The Fed's preferred measure of inflation is right on target at two percent a year but policymakers will scrutinize the continued job creation, the 3.1 percent gain in average hourly wages and a 2.8 percent quarterly gain in total compensation.
Mickey Levy of Berenberg Capital Markets, said, "The moderate improvement in wage growth keeps the Fed on track to hike again in December and enables them to transition to a slower pace of rate increases next year."Economist Joel Naroff notes that the pace of job creation "seems to be unsustainable."But he cautioned that the 3.1 percent wage gain "will be the data point that catches the attention of the Fed members the most. And they will not be happy about it."
Related Topics
Recent Stories
Robinson, bowlers help New Zealand go 2-1 up against Pakistan
Shahzeb Chachar to hold khuli kachehri on April 26
Heatwave amid Israel's aggression in Gaza brings new misery, disease risk
Tourism must change, mayor says as Venice launches entry fee
Court adjourns Judicial Complex attack case till May 17
Nasreen Noori’s book ‘Popatan Jahra Khwab’ launched
Wafaqi Mohtasib inspection team visits Excise and taxation office
AJLAC announces 5th Conference titled ‘People’s Mandate: Safeguarding Civil ..
Pak-US officials engage to enhance trade, investment ties
IBCC to promote educational excellence, expand regional presence
Pakistani 'Blue Helmets' serving UN Peacekeeping Mission in DR Congo set to leav ..
Putin says plans to visit China in May
More Stories From Business
-
Chinese minister felicitates Ahsan Iqbal on reappointment as Planning minister
1 hour ago -
Pak-US officials engage to enhance trade, investment ties
2 hours ago -
Stocks fall as tech shares sink, US economy slows
3 hours ago -
Higher taxes, awareness help decrease cigarettes sale in Pakistan
4 hours ago -
Ahsan Iqbal chairs CPEC JWGs, 13th JCC review-meeting
4 hours ago -
Industries Minister recommends urea fertilizer import to stabilize prices and supply
4 hours ago
-
Honda announces US$11 bn EV battery and vehicle plant in Canada
4 hours ago -
Zhao Shirin calls on Punjab Industries Minister
4 hours ago -
CEO APM Terminals calls on Finance Minister
5 hours ago -
SACM visits GTVC checks attendance register
5 hours ago -
CEO APM Terminals meets Commerce Minister
5 hours ago -
RTO destroys huge quantity of non-duty paid cigarettes
5 hours ago