Is the Fed's current tightening cycle wrong-footed?

Risk of deflation, not inflation

The Federal Reserve continues to act in the belief that the US economy is in the midst of a normal cycle, writes Seilern IM CIO Raphael Pitoun.

The Federal Open Market Committee remains in a tightening mode having increased the federal funds rate from 1% to 1.25% as the job market approaches its full potential. This might prove to be a mistake. Evidence accumulates that the link between the strength of the job market and wage increases has been broken. Statistics show that wage increases remain below where they should be at this stage of the cycle and the latest CPI figures, published yesterday for May, confirmed this absence of pricing pressure. From an international perspective, it is also remarkable that other developed...