US inflation continues to surge, as wage gains remain sluggish, therefore leading to concerns that more hikes by the Federal Reserve are on their way. Bob Nardelli, the former CEO of Home Depot, has warned that this may lead to a “skewed distribution of wealth”.
According to Nardelli, while the US economy is making gains, it is important to recognize that the current wage growth is not keeping up with inflation. The Federal Reserve has already made two interest rate hikes this year, with more expected to come before the end of 2018.
Nardelli has expressed concerns about the impact these hikes will have on the middle and lower classes, as higher interest rates often result in less spending power for those households. In contrast, the wealthy may not feel these changes as acutely, and could even benefit from the rising interest rates.
This “skewed distribution of wealth” could lead to further economic disparities, such as more households turning to credit and debt in order to maintain their standard of living. This could in turn lead to further inflationary pressure, as demand for goods and services remains strong but incomes are not keeping pace.
To address this issue, Nardelli suggests the Federal Reserve should consider a “dual mandate” that takes into account wage gains as well as inflation. By doing so, the Fed could strive to balance interest rates with the realities of wage growth, ensuring that the benefits of economic growth are more evenly shared.
Nardelli’s warning highlights the stakes for individuals, policymakers, and businesses alike. As the US economy continues to grow, a focus on wage growth alongside inflation will be necessary to ensure that economic growth benefits all Americans, not just the wealthiest.