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Federal Reserve Bank of New York President William Dudley predicts that inflation in the United States will rise in the coming months. This likely means he is also expecting an increase in interest rates, which is far from happening as of the moment.

“Our outlook anticipates a continued moderate growth trend, with some further strengthening in the labor market and an increase in inflation over the medium term toward our objective of 2 percent,” Dudley said.

Dudley’s forecast about the U.S. inflation was included in his statement during a press briefing in New York on Thursday. 

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Dudley Blames Wage Growth

Dudley’s statement on Thursday focused on labor inequality. This is connected to slow wage growth, which according to him is one of the reasons preventing the Federal Reserve Bank from getting a 2 percent annual inflation reading.  

The unemployment rate in the United States is at 4.3 percent, the lowest in 16 years, but wages only increased at a 2-to-2.5-percent rate annually.

Dudley believes “technological change” and “globalization” are reasons why there is wage inequality. He explained that these factors are preventing workers in the middle and lower part of wage distribution from experiencing an increase.

Besides the sluggish wage growth, low inflation readings that began in February are hindering the federal bank from reaching its goal for this year according to Dudley. He told reporters that these readings will have an effect on the U.S. price index for 6-10 months.

 

Fed Presidents Share Opinion on Inflation’s Future

If Dudley is looking forward to a rise in inflation and interest rates, one Federal Reserve Bank president has a different opinion.

Federal Reserve Bank of St. Louis President Charles Evans is not anticipating a rise in inflation. Evans also aims for the current interest rates to be maintained.

Meanwhile, Federal Reserve Bank of St. Louis President James Bullard appears to partially agree with Dudley. Bullard is open to increasing interest rates, but he is only voting for it if inflation rises.

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