Taking the Punch Bowl Away From a Pretty Mellow Party
The Federal Reserve looks poised to raise rates in June. Despite relatively sluggish GDP growth, the labor market looks to be closing in on full employment. Continued lackluster wage growth and inflation have been the fly in the punch bowl. Beyond the June move, calibrating policy will likely be influenced increasingly by inflation considerations. The experiences of our developed market counterparts in Japan and Europe potentially suggest caution may be warranted.