Economist's Insights

When Wages Pick-up, Maybe Kashkari will Stop Dissenting

Jul 11, 2017

Certain Fed Officials may point to an unemployment rate of 4.4% and compare it to their projection for a longer-run unemployment rate (NAIRU rate) of 4.6% to justify the additional tightening of the overnight rate. The relative levels of these two rates is also why some believe certain Fed officials may fear they are behind the (inflation) curve. However, Neel Kashkari, President of the Minneapolis Fed, is in neither group. His remarks on Tuesday indicated he’s honed in on wages in order to gauge when sustainable inflation might arrive. Kashkari noted, “It can’t be that bad to find workers, because if you really were having to compete with other companies to find this scarce talent, we would see wages climbing, …I’m looking for that wage growth as an indicator that, OK, maybe the economy is overheating, maybe now we’re going to start seeing inflation, and maybe that’s going to lead us to needing to raise interest rates.”