Tight US labor market should push inflation higher: Fed’s Dudley

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Employees place labels on prybars at the Vaughan & Bushnell Manufacturing Co. facility in Bushnell, Illinois.

U.S. inflation is a bit low but should rise alongside wages as the labor market continues to improve, allowing the Federal Reserve to continue gradually tightening U.S. monetary policy, New York Fed President William Dudley said on Monday.

“This is actually a pretty good place to be” with unemployment at 4.3 percent and inflation at about 1.5 percent, Dudley, an influential policymaker and close ally of Fed Chair Janet Yellen, told a chamber of commerce in Plattsburg, New York.

“We are pretty close to full employment. Inflation is a little lower than what we would like, but we think that if the labor market continues to tighten, wages will gradually pick up and with that, inflation will gradually get back to 2 percent.”