Fed Looks for Answers on Missing Inflation in a Tight Labor Market
- September meeting minutes show rising concern about low prices
- Investors still betting hevily on December interest-rate hike
MUFG's Tan: Central Banks Can't Create Inflation
U.S. central bankers are looking for clues that underlying strength in the economy will underwrite their plans to raise interest rates for a third time this year, a record of their meeting last month showed, as officials wrestled with why inflation remains so low.
U.S. financing conditions remain easy, the economy is expected to grow above 2 percent for at least the next two years, and unemployment dropped to 4.2 percent last month, the lowest since 2001. For all that, inflation rose by a mere 1.4 percent in the year through August, and forecasters, including those at the Federal Reserve, expect it to remain subdued for a while. They aren’t sure why. The central bank has missed its 2 percent inflation target for most of the past five years.