After starting with a ridiculous teaser headline (basically, “Janet Yellen doesn’t want you to get a raise”) the article doesn’t get even to an intermediate macroeconomics textbook level.
But wage growth contributes to inflation (your pay boost is your customers’ higher prices), and the Fed has to rein in inflation that’s too high before it wreaks havoc on the US economy. [“wreaks havoc” indeed… the reason the author cannot mention any actual havoc that could be wreaked from, dare we even mention an unspeakable, shudder, inflation rate of 5.2% is that… there isn’t any…]
It’s that recent spike [OMG, to 1.8% annual rate!] that the Fed has to contend with. Inflation for the most part doesn’t look like a serious threat right now — most FOMC members at their June meeting said they expected price growth to remain at or below 2 percent through 2016 [so why are we writing and reading this article?] , and LeBas agrees that there’s no reason to worry right now. But should something like a spike in wages help send inflation even higher, the central bank will want to tighten policy to keep the economy from overheating, for example by raising interest rates… Once wage growth catches on among lots more workers, it could help send inflation over that 2-percent mark. And while too little inflation can tank the economy, so can too much, as people’s money diminishes in value. [Oh really? But wait, weren’t wages rising? So incomes are not actually diminishing in value…?]
At the end of the day, the article reinforces the “money illusion” that is probably exactly the job of an outfit like vox.com to dispel! Talk about irony. via Janet Yellen doesn’t want you to get too big a raise – Vox.