Central Banks
Powell Puts US Pay Hikes at Heart of Fed’s 2023 Inflation Fight
- Focus moves to service industries where paychecks drive costs
- Tighter policy aims to stamp out risk of wage-price spiral
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Federal Reserve Chair Jerome Powell has a new North Star to guide his fight against inflation, and it will put American paychecks at the heart of monetary policy next year.
Powell says he’s looking at a price-gauge that covers everything from health care and haircuts to a night in a roadside motel. Because wages are an especially big cost for those service industries, “the labor market holds the key to understanding inflation in this category,” he told the Brookings Institution in November, in his final set-piece speech before the Fed’s latest interest-rate hike.