Do Wages Drive Prices, or Vice Versa? The Answer Matters for Interest Rates
Despite central bank worries, accelerating pay hasn’t fueled broader inflation in the past
FRANKFURT—Even as some prices such as for gasoline signal tentative easing of inflation pressure, the Federal Reserve and other central banks remain preoccupied with one that shows the opposite trend: the price of labor.
Soaring pay growth, officials worry, could prompt businesses to keep raising prices to offset higher labor costs, producing a wage-price spiral.