U.S. business economists see potential of wage price spiral as growth risk to economy.
The potential for a wage-price spiral is a major risk to U.S. growth in 2022, according to just over half of respondents in a National Association of Business Economics survey published Monday, showing that 19% of panelists believe a wage-price spiral is already underway.
Projections for Federal Reserve's target rate have also increased. The median forecast for the Fed's overnight rate at end-of-year 2022 rose from 1.125% in the Feb survey to 2.375% in the most recent survey. The median forecast for end-2023 also rose sharply—seeing the fed funds rate move from 1.875% in the previous survey to 3.00%.
Former Fed economists have told MNI the U.S. central bank is determined to head off a potential wage-price spiral with aggressive monetary tightening, even at the cost of larger-than-desired losses to growth and jobs (MNI: Fed Seen Taking Bumpy Road to Avoid Wage-Price Spiral).