So says the WSJ's Fed watcher John Hilsenrath in a piece just published. Thanks to our friends at Livesquawk for the heads up
"Federal Reserve officials have fuzzy views on how wage growth fits in with their objectives for the economy. They would like to see wages growing faster. It would give them confidence that the economy is closer to their dual goals of producing healthy job growth and modestly rising inflation. But the linkages between wages, jobs and inflation are unclear, and so they're not banking on faster wage growth materializing"
Yellen said explicitly in her March speech that she is prepared to start moving interest rates up even before she sees sure signs that wages are rising faster.
"That said," she added, "I would be uncomfortable raising the federal funds rate if readings on wage growth, core consumer prices, and other indicators of underlying inflation pressures were to weaken."
"Given her stance, Friday's employment cost report doesn't look like a deal breaker for the Fed in its long-running debate about when to raise short-term interest rates. Wages appear to be stagnant but not clearly weakening, which is what she set out as her threshold for not acting. Still, it creates new doubts for officials and doesn't help them build the confidence they're hoping to build that the job market is nearing full employment and inflation rising toward 2%"
Hilsenrath goes on to say that the September FOMC meeting will be a cliff hanger
Full article here
