Fed Mandates Clash as Jobless Drop Vies With Inflation: Economy

Just when Federal Reserve Chair Janet Yellen and her colleagues will be approaching a decision to raise interest rates, their two mandates will probably be pulling them in different directions.

...By the middle of next year, “we will have seen changes in conditions that make a higher inflation forecast still plausible,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “Part of it is that I expect a pickup in wage growth next year.”

Increases in pay mean a forecast for an eventual pickup in prices remains valid, said Crandall. “I’m also guessing that the impulse from the current downturn in commodity prices will have ended, if not turned around, by then.”