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Fed must prevent wage-price spiral: Lockhart

Reuters - Wednesday, July 2

WASHINGTON - The Federal Reserve must "react decisively" to stop inflation pushing up wages, one of its top policy-makers said on Tuesday in a clear warning about the prospects of interest-rate hikes, but there was no sign it had done so yet.

"Let me emphasize that I'm taking the recent inflationary pressures very seriously," Federal Reserve Bank of Atlanta President Dennis Lockhart said in prepared remarks to a panel discussion on the U.S. economy at Georgetown University.

A copy of his speech was made available to the media before delivery.

"Policy needs to react decisively against signs of the onset of formal compensating practices, including contracts, that treat inflation as a persistent reality -- in other words, something that must be lived with. Such signs are not apparent, and I don't expect them to materialize," he said.

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