After Kevin Warsh was confirmed as Federal Reserve chairman last week, he received a stark reminder of the challenges facing the central bank. The reminder came in the form of a worldwide surge in the interest rates paid by government bonds. The surge followed the spike in oil prices caused by the Iran War.
The rise in bond yields comes along with the news that, according to government statistics (which are manipulated to understate the real rate of inflation), consumer prices increased by 3.8 percent over the past year while wages increased by 3.6 percent. This means that, even though many Americans received nominal wage increases, their real (adjusted for inflation) incomes fell.
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