The Fed’s Beige Book released today makes a rate increase on March 21 a virtual certainty. If concerns about below target inflation were keeping some FOMC members on the fence, the comments in this book should get them into the higher-rates camp. Labor markets are tight throughout the nation, companies in most Districts are reporting labor shortages and wages are rising due to those tight market conditions. Prices are also increasing in many Districts. Residential construction is being curtailed by shortages of labor and materials.
When the Committee meets March 20-21, the President of the Minneapolis Fed will probably be the only member still advocating no rate increase. One wonders what economy he is monitoring. If future Beige Books read as strong as this one, four rate increases in 2018 will be the most likely policy path.
