Braking Down The News

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

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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.

 

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