Evidence that the Federal Reserve needs to tighten monetary policy continues to accumulate. First, inflation rates continue to move higher, and are likely to stay there for longer. The consumer price index has risen by 6.2% over the past 12 months, the fastest pace in 30 years. Moreover, the upward pressures on inflation are broadening and spreading to areas that are less likely to prove transitory, such as apartment and home rental costs. It’s no longer the case of a few outliers sparking inflation.
Second, the labor market is tightening and wage inflation is accelerating. The civilian unemployment rate has fallen to 4.6% and the Job Openings and Labor Turnover Survey, or JOLTS, report released Friday shows that the number of unfilled jobs remains above 10 million and that the “quits rate” (the number of workers who are quitting their current employer to find jobs elsewhere) is at a record level. These measures of labor market tightness are supported by recent wage developments. The employment cost index for private workers’ wages and salaries has risen by 4.6% over the past four quarters, the fastest pace since the 1980s.
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November 15, 2021 at 05:00PM
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Federal Reserve Put Itself Between a Rock and a Hard Place - Bloomberg
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