Wage increases are not consistent with getting inflation down to 2 per cent
There is little doubt that the latest levels of wage increases — 6 per cent in the US, 4.6 per cent in the eurozone and 6.5 per cent in the UK — are not consistent with getting inflation down to 2 per cent, the targets of all major central banks. These rates of growth must fall if inflation is to be tamed.
Over the past few days, central bankers have spoken about how they think the conflict between wages and prices will be resolved. Jay Powell, Fed chair, said wage growth was moderating from “highly elevated” levels a year ago. With headline inflation rates falling, “we want to see that process continue gradually”, he added, suggesting that time was a great healer.
Chris Giles FT 22 June 2023
https://www.ft.com/content/30153339-4abb-4cf1-9039-bfde65a1789e
Joachim Nagel, president of the Bundesbank, on Wednesday said some central banks in the past had given up too early in the fight against inflation and it was his “intention that we should really prevent this” from happening in the eurozone.
Nagel’s comments underline how many central bankers are determined to keep raising borrowing costs until they are convinced they have squeezed economic activity enough to bring inflation back down to their 2 per cent target.
FT 21 June 2023
https://www.ft.com/content/97d0bd2a-117b-4d72-ac94-4cbcd55b5a5f
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