White House officials are leaning toward the scenario where wages rise without inflation.
"There are a lot of ways to have the economy grow," Treasury Secretary Steven Mnuchin told Bloomberg in an interview Thursday. "You can have wage inflation and not necessarily have inflation concerns in general."
Markets have been nervous over how the scenario plays out. In addition to the stock market drop, government bond yields have spiked in recent days, with the benchmark 10-year Treasury note edging closer to 3 percent, considered a critical point.
Fed officials discussed the issue in January, though that was days before the report on wage growth. According to the minutes, Fed officials still tend to adhere to the Phillips curve, which shows that higher wages generally do come with higher inflation.
However, investors may not need to confront the question anytime soon. Strategists at Bank of America Merrill Lynch say the trend, if it does happen, is generally slow to develop.
"While rising interest rates could eventually hurt margins, the impact should be gradual as large cap debt is mostly long-term and fixed-rate," the firm said in a note this week.