Waiting for wage inflation is too late for rate rises

Wage inflation has been considered the missing piece in the US economic recovery. But waiting for wage rises before raising rates will be a grave policy error, argues Toby Thompson from Brooks Macdonald Funds.

Now the Federal Reserve has formally ended its quantiative easing programme, attention has switched to the timing of interest rate rises. The Fed will still be very much active in the markets, re-investing coupons and redemptions, and as regards rates, its guidance remains that the first rate increase will not be for a “considerable time” following the end of QE. This clearly begs the question as to what is meant by “considerable time”. Fed chair, Janet Yellen, has suggested there is no calendar meaning to the phrase, and that any action will be data dependent. Labour market partic...