Dallas Fed Chief Says Higher Wages Does not Equal Faster Inflation

Higher wages in the United States will not necessarily lead to faster inflation, Dallas Fed President Robert Kaplan said in Frankfurt on Wednesday.

His comments countered widespread market speculation that the briskest wage growth in almost nine years in the United States would drive up inflation, paving the ground for further policy tightening by the Federal Reserve.

“Were facing wage pressures right now in the United States because of a tight labor market,” Kaplan, a dove and a non-voting member of the Fed’s policy committee, told an audience in Frankfurt.

“I am less convinced that this will necessarily translate into higher prices because businesses have much less pricing power,” he added.

Among the factors curbing pricing power, he cited technological advances such as cloud computing, which allowed smaller companies to break into concentrated markets.

Expectations of higher Fed rates have been credited for contributing to a market rout earlier this week, which saw U.S. stock indexes post some of their biggest daily drops since the financial crisis.

Kaplan said he did not expect the market gyrations to have repercussions on the economy and described them as a “healthy” corrections from high valuations.

via CNBC

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.