The wage growth in the United States remained sluggish for a long time seems to be taken off. Increase in wage rate indicates the economy is expected to face an inflationary pressure in near future.
Lower commodity prices, increase in wage rate, and loosing strength of USD will cause the consumer price to increase. Therefore, the Fed is expected to tighten monetary policy at its meeting later this month.
"From now and to January next year, PCE inflation is expected to increase from 0.2% currently to 1.3%. We expect PCE inflation to stay in the range 1.00%-1.30% in H1 16. In H2 16 we expect PCE inflation to increase slightly as we expect a small rebound in oil and food prices. PCE inflation is estimated to reach the Fed's target of 2.0% in January 2017", states Danske Bank.
