1st - I'm on your side. I don't see inflation.
HOWEVER, the Fed likes to act BEFORE inflation is a problem. Greenspan used to use (he may still) a formula called P-star to determine future inflation. If he does, it may be indicating a speeding up of inflationary pressure.
From what? Non-Accelerating Inflation Rate of Unemployment. This is typically 5.5 -6%. With unemployment at 4%, it is likely we COULD see wage-push inflation. However, with stock options/booming market/increased productivity, the dynamic is considerably different today than it was 10 years ago.
Still, it's a question. Nobody can find good people to hire, and they have to hire mediocre people at ridiculously high wages (I know...it affects our decisions here). This could have a knock-on effect in 5-6 months. So, raising rates may not be a bad thing. In the past, the market has positively absorbed rate increases...no reason to think it won't again, over time. |
