Fed Raises Interest Rates in addition to Sees 3.6% Unemployment

Trade fears aren’t holding back growth forecasts

Both the minutes of the last Fed meeting, in April, in addition to the anecdotes from the latest style of the Beige Book, which surveys business contacts at each of the 12 regional Fed banks, were loaded with worries about the Trump administration’s trade agenda in addition to its potential to hurt economic growth. in which was particularly true from the manufacturing sector, where businesses expressed concerns over the consequences of the administration’s tariffs on imported steel in addition to aluminum, which recently went into effect.

Mr. Powell has acknowledged those concerns in addition to criticized tariffs in general, yet, under his leadership, the Fed has taken a wait-in addition to-see approach to possible downsides via White House trade policy. Economists generally warn in which tariffs slow economic activity while driving up prices from the economy, which would likely set off inflation. yet the Fed’s statement on Wednesday appeared to shrug off those concerns — though the statement continued to caution, as in which has previously, in which Fed officials would likely continue to monitor “readings on financial in addition to international developments” in determining future rate increases.

Lack of wage growth “a bit of a puzzle.”

The rise in consumer prices over the last year has effectively wiped out any wage increases for nonsupervisory workers, the latest Consumer cost Index data suggest. in which can be odd for an economy using a tight labor market, with unemployment running at a 3.8 percent. in addition to some analysts say in which’s a reason for officials to slow their pace of rate increases, since the benefits of a hot economy have not yet translated into a significant wage boost for workers.

At a comparable time of low unemployment, in 2000, “wages were growing at near 4 percent year-over-year in addition to the Fed’s preferred measure of inflation was 2.5 percent,” both above today’s levels, Tara Sinclair, a senior fellow at the Indeed Hiring Lab, said in a research note. “The Fed continues to promise to move slowly in addition to to carefully watch all incoming data. Too many increases too quickly could choke the economy before we genuinely see how Great in which could get.”

There was no sign in Wednesday’s releases in which most Fed officials share in which concern, despite seeing even lower unemployment in 2018 than previously anticipated.

Mr. Powell called the slow wage growth “a bit of a puzzle” saying the Fed “certainly would likely have expected wages to react more to the very significant unemployment rate.”

“Everywhere we go we hear about labor shortages, yet where are the wages?” he said. “in which’s a bit of a puzzle.”