Fed Sees Tight Labor Market with Higher Wages

Wall Street Journal (11/03/22) Timiraos, Nick

To fight inflation, the U.S. Federal Reserve has hiked interest rates by another 0.75 percentage point. Fed officials signaled future rate hikes could come in smaller increments. The latest increase lifts the central bank’s benchmark federal-funds rate to a range between 3.75% and 4.0%. Fed Chairman Jerome Powell said officials would contemplate a smaller hike at their next meeting in December, and he also warned that they might raise borrowing costs in 2023 more than they initially projected.

Fed officials are nervous that tight labor markets could drive persistent wage growth that boosts prices in the labor-intensive services sector. That could keep prices rising on everything from haircuts to car repairs even as prices decline for goods. “I don’t think wages are the principal story of why prices are going up. I also don’t think that we see a wage-price spiral,” said Powell.

This article originally appeared on wsj.com. Use this link to see the full article (subscription required): Federal Reserve Hikes by 0.75 Point, Signals Slower Increases but Ultimately Higher Rates