Texas Firms Expect to Raise Wages This Year at 2x the Fed’s Inflation Forecast | by Honest Austin | May, 2021

Businesses revise their expectations for wage and price growth in 2021.

Honest Austin

Texas business executives expect to hike wages this year at an annual rate of 4.7%, outpacing official forecasts for inflation this year and pointing to price pressures ahead.

Compared to just a few months ago, inflation and wage expectations have risen among surveyed business executives. The Texas Business Outlook Survey in December showed an average forecast of 4.3% for wage growth, before jumping to 4.7% in April.

Texas executives expect input prices to rise even faster this year, by a rate of 5.5%. In the same survey in December, they forecast an increase of only 3.7%.

Thats according to 376 executives surveyed by the Federal Reserve Bank of Dallas.

Growth expectations for selling prices, a closer proxy for consumer prices, rose to 4.3% in April, compared to a forecast of 3.4% four months earlier.

“Amid surging optimism

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How Much Inflation Will the Fed Tolerate?

Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: FOMC meeting, tech stocks tumble, Treasurys climb, and the risks of forward guidance.

FOMC Meeting
Investors are once again testing the adage, “Don’t fight the Fed.” The Federal Reserve Open Markets Committee (FOMC), which is holding a press conference this afternoon, has for months signaled that it does not intend to raise interest rates until at least 2024. But since February, yields on U.S. Treasury notes have moved up, implying three rate hikes in 2023.

Since the 2008 financial crisis, investors anticipating monetary tightening have generally been clobbered, and while bets against long-dated Treasuries have paid off for some in recent months, recent history indicates that the Fed wins battles with Wall Street. Today’s press conference is unlikely to reveal anything new in the way of policy, but it will indicate the extent

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