By Isaac Cohen*
There is abundant evidence that the expected liftoff in interest rates will not begin soon in the United States. Two sets of indicators, revealed last week, justify to this conclusion. The Federal Reserve stated two conditions should be met for liftoff to start: “further improvement in the labor market” and inflation has to “move back to its 2 percent objective.”
As informed by the Labor Department, last week job creation slowed down in March to 126,000, below last year’s monthly average of 275,000. Additionally, the Labor Department also said, over the last 12 months import prices fell 10.5 percent, because of low oil prices and the stronger dollar.
Low import prices pull down inflation. In February, annual inflation, including oil prices, was zero. Without food and oil, inflation has remained within a range of 1.3 to 1.7 percent for almost three years. Wage increases can push up inflation. However, wages are increasing slightly above 2 percent, barely over the rate of inflation. Central bank forecasts expect inflation to reach 2 percent by 2017.
Therefore, the unemployment rate is approaching 5 percent, but wages are barely increasing above the rate inflation, which has remained under target for 33 months. In these conditions, the central bank can wait.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.