With unemployment tumbling, the Federal Reserve this week is expected to set the stage for its first interest rate hike since 2006 despite concerns about meager wage growth and inflation.
Such a move could be controversial because the Fed is caught between conflicting economic forces. Job growth hit a 15-year high in 2014 and February’s 5.5% unemployment rate – down from 10% in October 2009 – is already close to the Fed’s desired range.
Normally, low unemployment puts upward pressure on wages and inflation as employers compete for fewer available workers.
But wage growth is still feeble. And inflation remains well below the Fed’s target, largely because of low oil prices and a strong dollar that’s making imports cheap for U.S. consumers.
That is like saying I want you to work but I want the money you earn to buy nothing.
So the fed wants you to work for as close to free as they can get it.