Here’s an interesting chart from ANZ Bank, especially at a time when financial market volatility has picked up.
It shows underlying inflation overlaid against wage growth in G7 nations, the largest advanced economies globally. The latter has been advanced by six months.
As a major determinant of domestic inflationary pressures, changes in wage growth tends to lead those in underlying inflationary pressures.
Right now, wages are pointing to an acceleration in inflation in the months ahead, potentially raising the risk of higher bond yields, tighter monetary policy settings and increased financial market volatility given what’s been seen over the past week.
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