The Fed Isn’t Heeding the Bond Market’s Message
Mistakes by the central bank that contributed to the financial crisis a decade ago may be repeating.
Fed Chairman Jerome Powell faces some tough decisions in the weeks ahead.
Photographer: Andrew Harrer/Bloomberg
Rising wages have the U.S. Federal Reserve on track to raise interest rates by a quarter of a percentage point on Sept. 26. That would be the eighth increase since December 2015 and put the target for the federal funds rate in a range of 2 percent to 2.25 percent. And the Fed may not stop there. Another 25 basis-point hike could follow on Dec. 19.
Although an acceleration in average hourly wage growth to 2.9 percent over the past year has increased pressure on the central bank to tighten monetary policy, the latest inflation data tell a different story. Reports last week showed producer prices dropping in August, consumer prices excluding volatile food and energy rising by a feeble 0.1 percent, and the import price index falling the most since January 2016.