Employers should stop giving pay rises to their staff, a member of the ‘s board has said, in a bid to help bring down .
Christopher Waller, one of six members of the Fed’s board, used a speech in Phoenix, to urge bosses to take into account inflation when looking at their labor force.
He pointed out that there are now almost two jobs for every person looking for work, and that wages were rising faster than they have in decades – making the target of 2 percent inflation even tougher to reach.
‘Wage growth has been a contributing factor to inflation, especially in the service sector, so it is important to get the labor market into better balance to bring future wage growth down to a more sustainable level that will assist in moving overall inflation lower,’ said Waller.
‘At any other time, I would be pretty unhappy about slowing growth, but not now.’
Christopher Waller, a member of the Fed’s six-person board of governors since December 2020, said he was concerned that pay rises were pushing up inflation
The Fed has issued an series of unusually large 75 basis point rate hikes, raising the policy rate to a range of 3.75 to 4 percent from near zero in March
Unemployment in the United States is at a near-50-year low, and wage growth, Waller said, is increasing inflation
Employees of HarperCollins Publishing protest outside their Manhattan offices on November 15
The Fed has been aggressively raising its policy rate in an attempt to tame inflation by cooling the economy with higher borrowing costs.
Consumer Prices Inflation has dropped in October to 7.7 percent, down from a 40-year high in June of 9.1 percent.
Waller said the ‘tight’ labor market was still cause for concern, telling his audience: ‘Business contacts tell me of empty offices and idle production capacity because employers cannot find workers.’
The job market in the United States remains extremely strong, with unemployment at near 50-year lows.
The latest government data, from November 4, showed that payrolls grew by 261,000 in October.
The rise is less than in the first quarter of the year, when an additional 539,000 jobs were being added per month.
He noted the recent spate of tech layoffs – with Amazon, Twitter and Facebook all shedding thousands of jobs – but said it had not spread to other sectors.
‘While there was roughly one job vacancy for every job seeker in what was a strong labor market before the pandemic, now there are almost two jobs for every person looking for work,’ he said.
He pointed to the aim of the Federal Open Market Committee (FOMC) to have inflation at 2 percent, and said that wage rises were making that target harder to reach.
‘Wages have been rising more quickly than they have in decades, much faster than productivity growth plus 2 percentage points that I think of as consistent with the FOMC’s 2 percent inflation objective,’ he said.
‘But I do see tentative signs of some cooling in the labor market, which is vital to keep rising labor costs from putting upward pressure on inflation.’
Waller said he will not make a final decision about what to do at the Fed’s December policy meeting until reviewing the rest of the data between now and then.
‘I will not be head-faked by one report,’ Waller said of consumer price data released last week, showing inflation dropped to its lowest annual rate since January.
‘I cannot emphasize enough that one report does not make a trend.It is way too early to conclude that inflation is headed sustainably down,’ he added.
However, tombala siteleri Waller also said the most recent inflation reports were a ‘positive development’ that he hoped would be ‘the beginning of a meaningful and persistent decline in inflation’ back to the Fed’s 2 percent target.
Waller says he is now ‘more comfortable’ with smaller interest rate increases going forward
Waller spoke after consumer price data released last week showed inflation dropped to its lowest annual rate since January
Waller noted that the Fed’s rate hikes have already had a significant impact on the housing market, which is the sector most responsive to interest rates.
‘As purchases of homes fall, so does demand for goods that typically accompany purchases—new carpeting, new furniture, new lawn mowers and so on,’ he explained.
‘So slowing home sales will decrease demand for goods that complement the purchase of a new home and that will put downward pressure on the prices of those goods,’ added Waller.
‘Our goal is to rein in demand, bringing demand and supply into better balance, which will help reduce upward pressure on inflation,’ he said.
Waller praised the latest inflation report, showing that total inflation and core inflation both decelerated in October.
‘Though welcome news, we must be cautious about reading too much into one inflation report,’ he said.’I don’t know how sustained this deceleration in consumer prices will be.’
To fight inflation, the Fed has issued an series of unusually large 75 basis point rate hikes, raising the policy rate to a range of 3.75 to 4 percent from near zero in March.
Waller said that as it stands ‘the data of the past few weeks have made me more comfortable considering stepping down to a 50-basis-point hike,’ in December and possibly to smaller quarter-point increases after that.
The Fed’s latest policy statement flagged a likely step down in the size of upcoming rate hikes, with officials shifting focus to a more nuanced approach that gives them more time to monitor how the economy and inflation are behaving while leaving themselves free to keep pushing rates higher.