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The Fed Wrestles With Rising Wages |
| Section: CURRENT ISSUES / ANALYSIS |
| Author: Patrice Hill |
| Publication: The world & I online |
| Issue Date: 2/1/1997 |
| Size: 1,772 Words, 11,177 Characters |
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This has led many politicians and business leaders to question whether the Federal Reserve's largely successful crusade against inflation in the 1980s and '90s hasn't also led to a lower standard of living.
In an unusually public debate that raged throughout 1996, they gave the central bank some candid advice against raising interest rates, putting the normally reclusive Fed governors in the spotlight at a time when they prefer to remain in the background: just before the presidential election.
The Fed was considering a rate increase at the request of two-thirds of its 12 reserve bank presidents for the very reason that President Clinton was urging it to hold off: Wage gains were starting to accelerate to averages well above 3 percent a year as unemployment dropped to a seven-year lo...
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...Fed appears to have responded to their criticisms by standing by while unemployment plunged lower last year.
"The Fed is gradually becoming more willing to test how far the unemployment rate can fall before inflation increases, a reflection of evolving attitudes and a new era in monetary policy," Levy said. "Falling inflation and slower growth over the next year will speed this evolution."
(812 of 11,177 characters)
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