The wage puzzle continues
- The direct effect from the currently-proposed tariffs is small
- Sustainable trend growth in the US at the moment is 1.75%
- Says he’s pleased labor force participation has stopped falling
- US economy and labor market are very tight right now
- Getting inflation expectations to 2% is ‘biggest issue’
The takeaway here is that Evans has grown much more hawkish in the past few months. I think he’s puzzled by inflation — like a lot of people — but he’s confident that inflation is coming.
What bothers me is his desire to get inflation expectations higher. What’s the point of that? So they can get inflation up and rates up? Just so they have room to cut rates later? The point should be growth and if the economy can grow without inflation, why is that so bad? Or put another way, why risk hiking too much and prematurely snubbing out the expansion just so you can get off the floor?