The acceleration in U.S. wage growth doesn’t support faster interest-rate increases yet, Federal Reserve Bank of Minneapolis President Neel Kashkari said.
“On Friday, with the jobs report, we saw a little hint that wages might finally be rising,” Kashkari said Monday during a Bloomberg Television interview. Still, it’s “not yet” enough, he said, adding that “it could be a blip, but let’s not ignore it.”
The U.S. Labor Department reported on Friday that average hourly earnings rose 2.9% in January from a year earlier, marking the fastest growth since June 2009. The news contributed to investor concern that the Fed would accelerate the pace of interest-rate increases, helping spur the biggest decline in the Dow Jones Industrial Average since June 2016.
Fed officials have penciled in three rate hikes this year, and analysts expect growth to pick up amid U.S. tax cuts and an improved global economy. Kashkari in 2017 spent his first year as a voter on the U.S. central bank’s Federal Open Market Committee arguing against higher rates, dissenting against all three increases on the grounds that inflation was too low. He isn’t a voter this year.
“It seems like people are pricing in that the tax cut is going to have more of a near-term stimulative effect than maybe we appreciated a few months ago,” Kashkari said. “Certainly valuation does seem on the high end, in terms of the stock market. We’ll see. Maybe this tax cut will lead to stronger earnings growth.”
