Last month, the US Department of Labor reported average hourly earnings had increased 2.9% in January. Wage gains, largely absent from the post-crisis recovery, are good news for the economy.
However, synchronised economic growth, the withdrawal of quantitative easing, tax cuts in the US and global infrastructure spending plans should mean higher inflation. The elevated US wage reading highlighted that risk, spurring US Treasury yields to four-year highs, temporarily knocking equity markets from record levels. This is meaningful because it suggests markets continue to underestimate inflation. For the best part of a decade, 'deflation' was deemed the greater threat. Powell marks start of Fed tenure with rate rise; Warns asset prices are 'elevated' in some areas Thre...
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