The Fed is confident that low oil prices will only produce transient disinflation and they believe signals from the bond market about low inflation are wrong but one element of the inflation picture irks them – non-existent wage inflation. Existing Premium trades remain in progress ahead of the last trading day of the month.
The economic models the Fed relies on shows that as jobs rise, wages should rise as well but that hasn't been happening and it's left many members of the Fed waiting 'patiently' for it to appear. The first sign may have come Thursday in the CPI report. The overall report was close to expectations but one number stood out: average weekly wages rose 1.2% in the month compared to the 0.3% consensus.