The interest rate on excess reserves can be raised, which will put upward pressure on short-term rates; in addition, the Federal Reserve will be able to employ other tools, such as fixed-rate overnight reverse repurchase agreements, term deposits, or term repurchase agreements, to drain bank reserves and tighten its control over money market rates if this proves necessary.
Wage increases accompanying growth in labor productivity are expected to occur in the future. Indicators of labor supply and demand conditions are effective in demonstrating firms’ confidence about the future, and for this reason I will pay careful attention to monthly changes, including developments in job openings. The second point for attention is the price-setting behavior of firms.