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IPFS News Link • Economy - Economics USA

Fed tells employers to STOP giving pay rises in order to bring inflation down:


Employers should stop giving pay rises to their staff, a member of the Federal Reserve's board has said, in a bid to help bring down inflation.

Christopher Waller, one of six members of the Fed's board, used a speech in Phoenix, Arizona to urge bosses to take into account inflation when looking at their labor force.

He pointed out that there are now almost two jobs for every person looking for work, and that wages were rising faster than they have in decades - making the target of 2 percent inflation even tougher to reach. 

'Wage growth has been a contributing factor to inflation, especially in the service sector, so it is important to get the labor market into better balance to bring future wage growth down to a more sustainable level that will assist in moving overall inflation lower,' said Waller.

'At any other time, I would be pretty unhappy about slowing growth, but not now.'

The Fed has been aggressively raising its policy rate in an attempt to tame inflation by cooling the economy with higher borrowing costs.

Consumer Prices Inflation has dropped in October to 7.7 percent, down from a 40-year high in June of 9.1 percent.

Waller said the 'tight' labor market was still cause for concern, telling his audience: 'Business contacts tell me of empty offices and idle production capacity because employers cannot find workers.'

The job market in the United States remains extremely strong, with unemployment at near 50-year lows.

The latest government data, from November 4, showed that payrolls grew by 261,000 in October.