I focus on the U.S. employment data most of the time, since it is among the broadest and most accurate of the economic indicators on the health of the economy. But it has been eclipsed in importance at this stage of the business cycle by every available measure of inflation pressures.
Interest rates can remain low only if inflation data remain benign, but that’s no longer likely. Economic conditions are ripe -- even overripe -- for inflation to accelerate. It’s becoming clearer that the Federal Reserve needs to increase interest rates more quickly now to avoid being forced to play catch-up later and risk a surge in rates that threatens to push the economy over the edge and into recession. Four rate hikes seem likely this year, but more are possible and probably desirable.