This is Going to Push the Fed Toward Raising Interest Rates Later This Month

There are several factors in play that I am discussing in detail in the EPJ Daily Alert that will determine if the Fed raises interest rates at the September 16-17 FOMC monetary policy meeting.

However, one belief of key Fed leadership is that labor markets are starting to tighten and that this will ultimately lead to accelerating price inflation. They found new support for their view yesterday in a new report released by the Fed.

The Federal Reserve Beige Book was released on Wednesday afternoon. It included reports that wage tightness and climbing wages were occurring in many districts:

 Wages were relatively stable in most Districts, with slight to moderate increases since the last report. However, several Districts reported increasing wage pressures caused by labor market tightening. St. Louis reported almost three-fifths of responding firms had raised wages in the last three months. New York cited increased pressure on starting salaries, while Cleveland noted intensifying wage pressure in the construction, retail, and transportation sectors. San Francisco reported upward wage pressures for skilled workers in the IT, information security, and construction sectors.

As I say, there are several factors the Fed is monitoring and this is just one piece of input but it does help provide justification for a September rate hike if FOMC members choose to go in that direction.

-RW