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Dwindling slack will soon lead to surge in wage growth

We believe that the slack in the labour market is dwindling and we expect a resulting accelerationin wage growth to be one of the big stories over the next 12 months. Unless productivity growth breaks out of its slump, that acceleration in wage growth will generate a corresponding pick-up in underlying price inflation. That is why we believe the Fed will be forced to begin raising its policy rate in March next year, a little earlier than many others expect.

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