Economy Better, but Not Yet Out of Woods

They point to the Labor Department's national employment statistics, which showed the fourth straight monthly decline in the U.S. job market in April. Wage growth has been weak for years, in sharp contrast to the wage spikes that underpinned the last outbreak of inflation in the U.S. in the 1970s.

The forces that are weighing on U.S. wages, though, did not exist in the 1970s -- namely, the addition of a huge portion of the world's population into the labor market with the introduction of emerging economies like China and India to the global economy. Moreover, labor unions have much less clout in the U.S. than they did in the 1970s, and wages for lower-income workers haven't kept pace with the rising cost of living.

So this time around, the forces of inflation may be less likely to show up in wage growth, but that hardly provides comfort to consumers as food and energy prices rise and the value of their income and savings declines with the plunge in the value of the dollar.

Credit Conditions Better, But Not Good

Meanwhile, even as the Fed finds innovative ways to inject liquidity into the still-fragile credit markets to reassure investors, interest rates aren't fully cooperating with the central bank. Libor, a key benchmark for borrowing costs in the banking system, remains elevated far above historical norms, suggesting that jitters in the credit markets remain and banks aren't comfortable with the low level of the Fed's target for its federal funds rate.

Libor, or the London Interbank Offered Rate, is calculated daily by the British Bankers' Association (BBA). Adjustable rate loans are benchmarked to Libor, so monthly interest payments for borrowers all over the world are determined by its fluctuations.