Bridgewater examines whether Federal Reserve tightening has gone far enough to sustainably return inflation to target. Despite meaningful progress, wage growth remains elevated at roughly 4.5%, while resilient spending, tight labor markets, and recovering corporate profits suggest the conditions for lasting disinflation remain incomplete.
Has the Fed Tightened Enough? Guideposts to Consider
Bridgewater
Aaron Goone, Bob Prince
Article
1 Pages
Key Takeaways
Wage Growth Too High: Wage growth is around 4.5%, compared with roughly 2.5% that Bridgewater estimates would be consistent with 2% inflation.
Spending Remains Elevated: Nominal spending growth is running around 5.5% to 6.5%, still above the 3% to 5% range viewed as consistent with equilibrium.
Labor Market Still Tight: Historically, roughly a 2% rise in unemployment has been needed to cool wages sufficiently, while earnings may need to fall about 20%.
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