The Fed Argument That's Strengthening the Case for a Rate Pause
- New research, recent commentary downplay wages-prices link
- Small businesses seek other ways to manage rising labor costs
An employee moves pallets of cans inside a warehouse in Findlay, Ohio.
Photographer: Luke Sharrett/BloombergThis article is for subscribers only.
Federal Reserve officials are rethinking their view that wage gains are fueling inflation, a key intellectual shift that bolsters the case for a pause in their tightening campaign this week.
Until recently, many top policymakers at the US central bank maintained that the road to lower inflation ran through the job market. The idea was that, because labor costs make up a substantial portion of the cost of providing services — an area where price pressures have been especially persistent — workers would need to feel some “pain” in the form of smaller wage increases for inflation to be brought under control.